NEW YORK: Tesla on Wednesday (April 19) reported a drop in first-quarter earnings as price cuts at Elon Musk’s electric vehicle company boosted demand but hit profit margins.
Profit came in at US$2.5 billion (RM11.09 billion), down 24% from the year-ago period on revenues of US$23.3 billion, which were up 24%.
Shares fell on the results, which were in line with Wall Street expectations for earnings per share, but showed a lower profit margin than expected.
Faced with more EV competition from other automakers, Tesla has undertaken a series of price cuts in 2023, most recently over the last 24 hours on some models in the United States.
Investors who are bullish on Tesla’s strategy see the price cuts as a way to grow its market share at a time when rivals are also ramping up production amid cost pressures.
The company said its profit margins had been trimmed at “a manageable rate”, as it pointed to a “unique opportunity for Tesla” while signalling more price cuts ahead.
“As many carmakers are working through challenges with the unit economics of their EV programmes, we aim to leverage our position as a cost leader,” Tesla’s press release said.
In its press release, Tesla said newer plants in Texas and Germany are ramping up. It also said factory tooling was on track for the Tesla “Cybertruck,“ an unorthodox model that has generated fanfare.
Tesla reaffirmed its 2023 target of 1.8 million vehicles.
Tesla missed market estimates for first-quarter margin, throttled by a series of aggressive price cuts meant to spur demand in a sagging economy and fend off rising competition.
Tesla reported total gross margin of 19.3%, compared with expectations of 22.4%, according to 14 analysts polled by Refinitiv. This was the lowest since the fourth quarter of 2020.
For the first quarter, Tesla’s automotive gross margins, a closely watched figure by analysts and investors, dropped. Analysts had expected Tesla to report auto gross margin of 23.2% for the quarter, according to 17 analysts polled by Visible Alpha, down from a record 32.9% a year earlier and the lowest since the fourth quarter of 2019.
Shares of the Austin, Texas-based automaker were down 3.2% in after-hours trading. – AFP, Reuters