Tesla beat Wall Street’s expectations for the first quarter of 2023 and gross margin fell significantly in a sign that a series of price cuts could hurt the company’s financials. The company posted revenue of 85 cents per share on $23.33B in total revenue, just below analysts’ prediction of 86 cents per share at $23.34B.
Gross margin, a figure that investors are paying close attention to this quarter, fell to 19.3% year-over-year from 29.1% after the company recently initiated a series of price cuts.
Tesla cut prices again on Tuesday evening, just hours before the company released its first-quarter earnings. A series of cuts has brought down the prices of the Model S, 3 and X significantly since the start of the year. On Tuesday, the prices of Model Y vehicles were cut by $3,000 and the Model 3 price was cut by 4.7%, now below $40,000 for the first time.
“Our near-term pricing strategy considers a long-term outlook on per-vehicle profitability while considering the potential lifetime value of a Tesla vehicle through autonomy, supercharging, connectivity and service,” Tesla earnings report said.
The latest price cut marks the second cut this month and comes after the company reduced expected deliveries. Tesla announced that it delivered a total of 422,875 vehicles in the three-month period ending in March, just short of analyst estimates of 430,000 deliveries. The company said it produced 440,808 vehicles this year.
First quarter revenue also declined slightly quarter-over-quarter, but increased significantly year-over-year to $18.76 billion.
Tesla shares, which are up nearly 50% this year, were down 2.5% Wednesday morning in response to a new round of price cuts as investors wary of a potential hit to profit margins that could result in the company . Although Tesla Chief Executive Elon Musk said at the end of fiscal 2022 that the company has seen the highest level of demand since its first round of price cuts, some analysts are not convinced and worry that although demand has picked up, growth has been modest in comparison. What did Musk predict?
“Tesla’s weak quarter is the latest sign that growing macroeconomic uncertainty is having some impact on demand for its electric vehicles,” said Jesse Cohen, a senior analyst. Investing.com,,The negative impact of the price reduction strategy resulted in a major decline in the company’s operating margin.
Other industry experts are more optimistic on Musk’s moves. Alyssa Altman, head of transportation and mobility at digital consultancy group Publicis Sapient, says Tesla has proven it can grow profitably even when margins are tight.
Altman said how the market reacts will depend on whether Wall Street continues to focus on Tesla’s “short-term margin contraction that has already formed and will become long-term for the EV industry”. does not give importance.
The company has also struggled with various lawsuits and other production and vehicle issues over the past quarter. In February, the company was forced to recall more than 360,000 vehicles over a self-driving software flaw that US regulators say could cause the vehicles to not comply with traffic safety laws and risk accidents. The National Highway Traffic Safety Administration (NHTSA) began an investigation in March into complaints that Tesla’s steering wheel would lock up while being driven. The investigation will look at approximately 120,000 cars. Earlier this month, the company was forced to pay $3.2m to a black former employee after a federal jury ruled that Tesla failed to prevent serious racial harassment. Finally, a Reuters report found images and video captured by Tesla cameras between 2019 and 2022 were at times highly invasive and could be linked to specific locations in group chats between employees, even in company privacy. points out as a priority.
Meanwhile, Musk has reclaimed the title of world’s richest man after a rally in Tesla shares in February.