Tesla’s profits fell sharply in the first three months of the year after it lowered the prices of its electric vehicles, the company said Wednesday.
The automaker, led by Elon Musk, said it made $2.5 billion in the first quarter, down from $3.7 billion in the last three months of last year and $3.3 billion in the first quarter. quarter of 2022.
Tesla sold more electric cars in the United States last year than all of its competitors combined. But market share fell as traditional automakers such as General Motors, Ford Motor and Volkswagen began selling electric cars that often undercut Tesla’s price. Tesla has been overtaken by BYD in China. Tesla’s product line hasn’t changed much, which can be a major drawback as rivals attract buyers with tempting new models.
To try and maintain its grip on the market, Tesla has made a series of price cuts across its four models this year. Because it has much wider profit margins than other automakers, the company is theoretically in a strong position in a price war.
But the price cuts seem to be rapidly eroding those margins. In the first quarter, the gross margin that measures the profitability of Tesla’s auto business, excluding revenue from clean energy credit sales, was 19 percent, down from nearly 27 percent for all of 2022.
The average sales price for Tesla vehicles in the first quarter of this year was nearly $46,000, down from $51,400 in the last quarter of 2022. But despite that 11 percent drop, Tesla vehicle shipments were only 4 percent higher.
On a conference call to discuss the company’s quarterly results, Mr. Musk said Tesla’s profit margin is among the highest in the industry. “We believe that aiming for higher volumes and a larger fleet is the right choice here,” he said, “versus lower volume and higher margin.”
During the call, Zachary Kirkhorn, Tesla’s chief financial officer, was asked to provide a 2023 forecast for Tesla’s auto industry gross margin, but said it would be difficult due to economic uncertainty.
Tesla expects to sell 1.8 million cars in 2023, up from 1.3 million last year.
The company’s adjusted earnings per share of 85 cents were in line with Wall Street analysts’ expectations, and the stock fell about 4 percent during extended trading on Wednesday. Shares of Tesla are up nearly 50 percent this year, but still down 56 percent from their 2021 high. The stock came under pressure last year, in part because Musk sold billions of dollars worth of Tesla stock to advance his acquisition of Twitter. to help finance.
Competition will get fiercer this year as traditional automakers expand their electric lineup. Volkswagen’s ID.4, an SUV, starts at about $39,000, less than the $47,000 starting price for Tesla’s Model Y SUV
GM plans to start selling an electric version of its Equinox SUV for about $30,000, as well as electric versions of the Silverado pickup truck and Blazer SUV
Investors have been waiting for Tesla to respond with new vehicles. The company has promised to start selling the Cybertruck pickup this year, though it won’t be available in large numbers until 2024. this year.
“This is really a very radical product,” he said. “It’s not made the way other cars are made.”
There is also speculation that Tesla will unveil a car priced lower than the Model 3 sedan, which starts at $39,990 before government incentives.
The company’s strategy of lowering prices to stimulate demand also risks offending Tesla owners by lowering the resale value of their cars. Prices of used Teslas have fallen in recent months.
Tesla’s sales, like those of all automakers, are affected by rising interest rates, making car payments more expensive for buyers. But Tesla is also buoyed by changes in the tax credits electric cars receive in the United States.
Because it already makes batteries in the United States, Tesla had an easier time qualifying for new rules that went into effect Tuesday and determining which vehicles qualify for a $7,500 tax credit. To qualify, batteries must be made with lithium and other minerals mined or processed by a U.S. trading partner, and with battery components made in the United States, Canada, or Mexico.
Tesla also sells solar panels, home power storage batteries, and large batteries used by electrical manufacturers and distributors to store solar and wind energy. Mr Musk said this month that Tesla would build a factory in Shanghai with the aim of assembling 10,000 of the giant batteries annually.
