Tesla’s interest in bitcoin has been decried as a distraction and sideshow for the electric car company. But when a widespread covid lockdown in China forced Tesla to shut down its Shanghai factory for 22 days in April, it became a lifeline. The impact of the shutdown on Tesla’s business was severe enough that the company sold 75% of its bitcoin holdings to bolster its cash reserves.
“The reason we sold a bunch of our bitcoin holdings was because we weren’t sure when the covid shutdowns in China would ease, so it was important for us to maximize our cash position” , CEO Elon Musk told investors during a July 20 earnings report. call.
“This should not be seen as a verdict on Bitcoin,” he added. “It’s just that we were concerned about the overall liquidity of the business.”
Chief Financial Officer Zach Kirkhorn said the company made a small profit on its bitcoin sale, but that gain was wiped out when Tesla wrote off the value of the rest of its bitcoin holdings as the crypto industry crumbled. was collapsing. In the end, the company reported a loss of $106 million in bitcoins.
Musk said that despite the loss, the company is “certainly open to increasing our bitcoin holdings in the future” and has not sold any of its dogecoins.
Tesla has seen its biggest drop in production since the start of the pandemic
The April shutdown in Shanghai sent Tesla’s car production down 15% from the previous quarter, the biggest quarter-over-quarter drop since the pandemic began. Although Tesla has since opened two new factories in Austin and Berlin, they haven’t grown fast enough to make up for the loss of production in Shanghai.
Kirkhorn told investors on the earnings call that the company is “working on creeping inefficiencies in our new plants, which are progressing well, but have impacted margins as these plants come online.” Musk called the Austin and Berlin facilities “money furnaces”.
Heavy investment in new factories, along with falling car sales, sent Tesla’s operating profits plummeting by nearly a third last quarter, the biggest drop since 2019.
Tesla executives hint at ‘record’ second-half production
Despite Tesla’s recent challenges, executives expressed optimism for the rest of the year. Musk pointed out that Tesla factories in Shanghai and Fremont hit record production levels in June.
“As a result, we have the potential for a record second half,” he said, before adding: “I want to stress that this is obviously subject to force majeure, things outside our control. In recent years, there have been quite a few cases of force majeure.