Tesla has cut prices several times in recent months to stimulate demand for its electric vehicles, a move that helps its sales continue to rise but also weighs on its profits.
For Elon Musk, the strategy is clear: it is better to produce more even if the margins are temporarily lower.
The group is very committed to the commercialization of autonomous driving tools in which it has been working for several years, he recalled.
“It’s better to deliver a large number of cars at a lower margin and collect that margin later as we refine” these tools, the manager explained.
In the first quarter, the company delivered 36% more than in the same period of 2022.
Its revenue rose 24% to $23.3 billion.
Its net profit at the same time plunged 24% to $2.5 billion.
To prevent sales from slowing down too much due to the economic slowdown, the rise in interest rates that make buying a car more expensive, and the arrival of many models of electric vehicles, Tesla has in fact had the option, in recent months, of to lower their prices, both in the United States and in China or Europe.
The group further lowered prices in the United States on Wednesday on its popular Model 3 and Model Y.
Result: Its operating margin, from 16.8% in 2022, plummeted to 11.4%. However, it is still much higher than that of Ford (4% in 2022 according to FactSet) or that of General Motors (6.6%).
On the barbed wire
Tesla acknowledges that the price cuts have weighed on its margins but believes they are staying at a “manageable pace.”
The company was also affected by higher raw material, logistics and warranty costs, as well as expenses incurred to increase production of so-called 4680 battery cells.
Tesla wants to cut costs by improving productivity at its new factories and reducing logistics costs, the group said in a statement.
Many other automakers are still investigating how to monetize their new electric vehicle programs, and in this context, Tesla wants to take advantage of its leadership position to consolidate its position, the company explains.
Although new models arrive on the market every quarter, Tesla’s dominance in the electric vehicle segment is gradually weakening: according to the Cox Automotive firm, in the United States the group’s market share has gone from 79% in 2020 to 62 % in the first. room.
The price cuts “certainly help in the short term” to increase sales, says Jessica Caldwell of Edmunds. “However, in the long term, Tesla is on the razor’s edge between maintaining its brand image and its efforts to increase sales volume,” she said in a note.
Tesla shares, which had fallen 65% in 2022 before rebounding about 47% since the start of the year, lost 4% on Wall Street electronic trading on Wednesday.
When asked about full-year profitability, CFO Zach Kirkhorn stressed that it would depend in particular on the start-up of new factories in Texas and Germany, and that logistics and raw material costs, especially lithium They should decrease a bit. .
The company also stood by its goal of producing just over 1.8 million vehicles by 2022. It also noted that production of its Cybertruck pickup was “on track” to begin as scheduled during the year at its new Texas factory. .
Source: BFM TV
