"We're very pedal to the metal, come rain or shine." - Tesla CEO Elon Musk, October 2022
Elon Musk wants Tesla(NASDAQ: TSLA) to be the largest automobile manufacturer in the world by 2030. And it looks increasingly likely he could pull it off.
Tesla's production figures are skyrocketing, and the company is rapidly climbing the global vehicle sales rankings. In 2020, Tesla ranked 27th. Last year, it was up to 15th. And with every jump in production, Tesla's financial prospects improve too.
So let's see what's happening by the numbers and whether it makes Tesla a buy, sell, or hold.
Data source: Statista
Tesla's outstanding 2022
Last year was a banner one for Tesla. The company crossed the 1.3 million vehicle mark. That means Tesla produced more vehicles in 2022 than it did from 2012 to 2020.
Obviously, one of the most significant benefits of increasing production is boosting sales. Tesla's overall revenue jumped from $53.8 billion in 2021 to $81.4 billion -- an increase of 51% -- largely due to rising vehicle sales.
Similarly, higher production lifted earnings. Net income grew from $5.5 billion in 2021 to $12.6 billion in 2022. That's an impressive 129% increase.
Higher production leads to economies of scale
Economies of scale might sound complicated, but it's actually a simple idea. Imagine running a wood-oven pizza joint. It takes a while to get a wood oven hot. And if you only cook one pizza in it, your energy costs will be high.
However, the more pizzas you cook in that oven, the cheaper your energy costs become. This principle holds true whether you're talking about wood ovens or massive car factories: the higher the output, the greater the efficiency.
Those are economies of scale, and they're now bearing fruit for Tesla.
Data source: Tesla 2023 investor day presentation.
As you can see, Tesla's labor hours decrease as its production facilities mature. That means the company can reduce labor costs per vehicle and realize more profit on each vehicle sold. Moreover, as costs decrease, Tesla can similarly reduce its prices, without significantly squeezing its margins.
Is Tesla a buy?
In the end, Tesla's rising production numbers indicate the company is on track with Elon Musk's vision. Currently, ToyotaMotor is the world's largest vehicle seller, with 9.6 million vehicles sold in 2022.
Tesla's rising production numbers, combined with its growing economies of scale, make the company a growing behemoth. And for investors, rising production and increasing efficiencies mean the stock looks attractive, even at its pricey valuation.
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Jake Lerch has positions in Tesla and has the following options: long April 2023 $145 puts on Tesla and short April 2023 $155 puts on Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
