Tesla Fails to HODL Bitcoin Amid Decline in Revenue

According to Tesla’s Q2 earnings report, Tesla sold 75% of its bitcoin, likely taking a loss in a market that hasn’t recovered from “crypto winter.” It got $963 million for the bitcoin it sold.

The “crypto winter” stung plenty of bitcoin investors, including the El Salvadorean government, which invested heavily in bitcoin and hasn’t yet given up on its deeply flawed efforts to launch bitcoin as legal tender.

Tesla’s overall earnings and profits took a beating amid continuing supply chain issues. It earned $16.9 billion in revenue, down from $18.8 billion in Q1 2022. The revenue included about $2.3 billion in profit, better than expected but still down from the $3.3 billion in profit in Q1.

Tesla says its remaining digital assets – most likely 25% of the bitcoin that it originally purchased for $1.5 billion, plus some Dogecoin from online sales of merchandise – is valued at $218 million. Elon Musk says Tesla stopped accepting bitcoin payments for its electric vehicles out of concern for its environmental impact. He had met with North American cryptocurrency miners about the issue, likely leading to the creation of the Bitcoin Mining Council.

Elon Musk especially supports Dogecoin as a more “fun” cryptocurrency, and one that likely uses less energy per transaction. He plugged it when he hosted Saturday Night Live, though it didn’t help Dogecoin’s price any. He even reportedly adopted one of the breed of dog featured in the Doge meme, a Shiba Inu, as part of his show of support.

(Contrary to some reports, though, he likely never bought the cheap knockoff, Shiba Inu Coin.)

The company’s executives said that the bitcoin sale was meant to increase its cash on hand in the wake of China’s COVID lockdowns, which hurt its ability to produce cars at Gigafactory Shanghai. Despite the shutdown of Gigafactory Shanghai, Tesla says it ended Q2 with a strong month for producing vehicles, likely helped by the long-anticipated partial opening of Gigafactory Berlin and Gigafactory Austin.

Tesla also plans to increase the size of Gigafactory Austin by 500,000 square feet, according to regulatory filings. Gigafactory Austin currently makes Model Y vehicles. Tesla also plans to manufacture battery cells and the upcoming Cybertruck and Tesla Semi at Gigafactory Austin.

Plans to expand Gigafactory Shanghai seem to be on-again, off-again. However, Tesla may not entirely want to give up on China yet, considering its high investment in the country that includes a datacenter meant to placate the Chinese government with its concerns about espionage.

Tesla failed the Bitcoin “HODL Test” amid its current challenges with its supply chain and plans for expansion. However, executives say that it might repurchase bitcoin at some point in the future. It should simply take a lesson from El Salvador and not buy it at its all-time highs.