Tesla’s profit margin drops in the first quarter – 04/19/2023 – Market

Tesla’s profit margins were below market estimates for the first quarter of this year, constrained by a series of aggressive price cuts intended to stimulate demand in a slumping economy and fend off increasing competition.

Tesla, led by Elon Musk, reported on Wednesday (19) a total gross margin (profit divided by revenue for the period) of 19.3%, compared with expectations of 22.4%, according to 14 analysts consulted. by Refinitiv. This was the lowest value since the fourth quarter of 2020.

Shares of the Austin, Texas-based automaker were down nearly 4% in the aftermarket.

The electric vehicle maker has slashed prices several times in the United States, China and other markets since late last year, with Musk saying Tesla could sacrifice its margins to drive growth in sales volume during a recession.

However, analysts say Tesla may need to cut prices even further, pressured by the current price war, especially in China, to sustain demand for its older model lineup, even as it remains producing more up-to-date versions at the company’s factories. in Berlin and Texas.

In the United States, where recent industry subsidies have modestly boosted sales, Tesla has already slashed car prices six times this year, which has squeezed its automotive gross margin. The company also extended price cuts in Singapore, Israel and Europe.

The automaker on Wednesday reiterated its forecast to deliver around 1.8 million vehicles this year. The company has previously said it delivered far fewer cars than it produced due to logistical issues. In the first quarter, Tesla delivered about 18,000 fewer cars than it produced.

The company reported revenue of $23.33 billion in the first quarter, compared with an estimate of $23.21 billion, according to a consensus of 22 analysts polled by Refinitiv.

The company reported net income of $2.5 billion, down from $3.32 billion a year earlier.