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Tesla Offloads 75% Holdings in Bitcoin Amidst Turbulent Crypto Market

Industry: Vehicle Manufacturing
Current: Company Performance

Tesla Inc. sold a large portion of its bitcoin holdings, which helped the biggest electronic currency in the world gain legitimacy
The world’s largest manufacturer of electric vehicles sold bitcoin worth $936 million or 75% of its overall holdings in bitcoin
The corporation, run by Elon Musk, had just $218 million in bitcoin left on its books as of the first quarter of 2022 as opposed to $1.26 billion in the previous quarter

Tesla, the world’s largest manufacturer of electric vehicles (EVs), announced that it sold $936 million worth of bitcoin (BTC) in the second quarter of 2022, or 75% of its total holdings. Releasing the earnings report on July 20, 2022, the company stated that it optimized its financial position by abandoning bitcoin due to the “uncertainty of the COVID lockdowns in China.” Tesla’s CEO, Elon Musk, however, stated that the company is willing to increase its exposure to bitcoin in the future. Immediately after the release of the report, the price of bitcoin dropped 1.7% to $23,300 but quickly recovered to its prior levels after Musk’s remarks on the earnings call.

Cash Maximization is a Priority for Tesla

In February 2021, Tesla disclosed that it invested $1.5 billion in bitcoin, and subsequently sold 10% of its stake that April. In the earnings report, Tesla announced that the value of its digital assets dropped to $218 million and that a bitcoin impairment affected the second-quarter earnings. During the earnings conference call, Elon Musk said that due to the uncertainty surrounding the COVID-19 shutdowns, the company sold bitcoin to maximize its cash position. The transaction, he said, should not be interpreted as “any judgment on bitcoin.”

Tesla’s Revenue Increases but Automotive Margins Decline

Due to inflation and stiff competition for battery cells and other components used in EVs, the automotive gross margin decreased to 27.9% from 28.4% a year ago and 32.9% in the last quarter. The company’s overall revenue stood at $14.6 billion, with $1.47 billion coming from services and other revenue, and $866 million from the energy division. The Russia-Ukraine crisis and the COVID-19 resurgence in China are the main causes for production hiccups at the bulk of Tesla’s operations. These global problems worsened the shortage of semiconductors and raised the price of raw materials used to make EVs. All these factors contributed to the decrease in gross margin in the automobile market.

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