Robust growth in Chinese market drives Tesla to record profits in 2021
Published: Jan 27, 2022 10:06 PM
An inside view of a

An inside view of a "Tesla Model Y" car, an all-electric compact SUV by US electric car giant Tesla, during its presentation at the Automobile Club in Budapest, Hungary Photo: AFP

US electric carmaker Tesla has been investing big in the Chinese market despite pressure from some US politicians, and its 2021 earnings report showed that the company has benefited greatly, as China has become not only a sales market but also an export hub for Tesla cars.

Total revenue grew 65 percent year-on-year in the fourth quarter of 2021 to $17.7 billion, mainly due to growth in vehicle deliveries, the company said. In 2021, global deliveries were up 87 percent compared with 2020.

Production of both Model 3 and Model Y vehicles ramped up further throughout 2021 in Shanghai.

Local production is essential for reducing the cost per vehicle and improving the stability of the firm's global supply chain, the financial report said.

In 2021, Tesla Gigafactory Shanghai delivered 484,130 vehicles, a year-on-year increase of 235 percent. More than 160,000 vehicles were delivered to overseas markets in 10 countries and regions across Europe and Asia, accounting for 51.7 percent of Tesla's global deliveries.

Asked about how Tesla has improved its profit rates, Zach Kirkhorn, CFO of Tesla, said the Model Y was the key because its profit margin is much higher than that of the Model 3. The localization of Gigafactory Shanghai is also an important factor, as localization is helpful in driving up profit margins, he said.

Despite the global supply chain crunch and chip shortage, the production capacity of the Gigafactory Shanghai further improved in 2021, with the parts localization rate reaching 86 percent. In the third quarter of 2021, the output of Model 3 and Model Y vehicles from Gigafactory Shanghai exceeded that of the firm's California factory for the first time.

Tesla has aimed to increase production as quickly as possible, not only through ramping up production at new factories in Texas and Germany, but also by maximizing output from established factories in California and China, according to the financial report.

In 2021, Tesla completed its highly anticipated research and development (R&D) and innovation center and its Gigafactory data center in Shanghai.

The R&D center in Shanghai is its first overseas R&D facility dedicated to vehicle development. It has 28 laboratories that focus on the development of Tesla's software, hardware, processes and technology in China.

The Shanghai Gigafactory data center is being used to store factory production data during its operation in China.

Zhu Xiaotong, president of Tesla's greater China region, said that amid the global transition to sustainable energy, Tesla has fulfilled its commitment to focusing on the Chinese market.