Bitcoin price slides after Elon Musk says cryptocurrency sale was to maximise Tesla’s cash position after a shaky second quarter
Tesla CEO Elon Musk has not helped investor confidence in cryptocurrencies, after the EV maker sold the majority (75 percent) of its Bitcoin holdings.
The world’s most valuable car maker also posted shaky second quarter financial results after hours on Wednesday, reflecting some tough challenges it currently faces.
During the second quarter earnings release, Musk also revealed that Tesla’s new factory near Berlin made 1,000 cars per week in June, with the Austin (Texas) factory expected to hit the same production target in the next few months.
That came after Elon Musk said last month that Tesla’s new car factories in Texas and Germany were “losing billions of dollars” and were “gigantic money furnaces”.
Tesla reportedly suspended most production at its Shanghai plant in the first two weeks of July in order to upgrade the site to boost output.
These shutdowns at Gigafactory Shanghai resulted in about 254,000 deliveries overall (down 18 percent from Q1), instead of well over 300,000 that had been expected.
And this has impacted Tesla’s financial performance in the second quarter.
Tesla’s second quarter profit fell 32 percent when it posted a record profit of $3.3 billion in the first quarter.
In the second quarter however, the company reporting a net profit down at $2.26bn.
Revenues for the quarter meanwhile came in at $16.93 billion, compared to $17.1 billion that Wall Street had expected.
The company also sold 75 percent of its bitcoin holdings, leading to a slide in the cryptocurrency price.
Tesla’s $1.5bn investment in Bitcoin, which it had revealed in February 2021, prompted a surge of demand in the digital currency.
The firm revealed in February this year that the value of Bitcoin it held was $1.99 billion (£1.47bn) at the end of 2021.
Tesla’s investment announcement in February 2021 caused a spike in Bitcoin’s value, and in March 2021 the car firm said it would begin accepting Bitcoin as payment for Tesla vehicles.
But in May 2021 it reversed its position after critics highlighted the environmental concerns around the currency, which is “mined” using a highly energy-intensive process that often relies on fossil fuels.
The price of Bitcoin had been trading as high as $70,000 last November before it (and other digital currencies) crashed in spectacular fashion.
Bitcoin is currently trading at just $22,990.
“The reason we sold a bunch of our bitcoin holdings was that we were uncertain as to when the Covid lockdowns in China would alleviate so it was important for us to maximise our cash position,” Musk was quoted as saying by CNBC during Tesla’s earnings call.
“This should be not taken as some verdict on Bitcoin” Musk added.
CFO Zachary Kirkhorn and Musk however confirmed that Tesla had not sold any of its dogecoin.
In its earnings report, Tesla said the company continues to experience manufacturing slowdowns due to supply chain and other issues which limited its ability to consistently run its factories at full capacity.
Tesla is also restructuring its operations and is in the process of axing 10,000 jobs, after Elon Musk recently announced he had a “super bad feeling” about the economy and planned to cut headcount by 10 percent and “pause all hiring worldwide.”
That location was where data annotation teams had helped to improve the company’s Autopilot driver assistance technology.
And last week Andrej Karpathy, Tesla’s Director of AI and the leader of the Autopilot Vision team, announced on Twitter that he had resigned from Tesla.
Despite these setbacks, Musk during the earnings call said the company remains on track to release a beta of full self-driving capabilities by the end of the year.
Musk has made repeated grand claims in this regard, and has aggressively hyped Tesla’s driver assistance system (Autopilot) and self-driving technology for years now.
In July 2020, Elon Musk said that Tesla was “very close” to achieving level 5 autonomous driving technology.
Level 5 is the holy grail of autonomous driving technology, as level 5 vehicles will not require human intervention, and need for a human drivers is eliminated.
Indeed, it is said that level 5 cars won’t even have steering wheels or acceleration/braking pedals.
These cars will be free from geofencing, and will be able to drive anywhere, and do anything that normal car with a human driver can do.
Tesla cars currently operate at a level-two, which requires the driver to remain alert and ready to act, with hands on the wheel.