On April 19, according to Reuters, Elon Musk, the CEO of Tesla Inc (TSLA.O), reiterated his strategy of engaging in a price war that he initiated at the end of last year. Musk stated that the company would focus on increasing sales growth rather than profit in a sluggish economy. The company’s most recent quarterly gross margin was its lowest in two years, falling short of market expectations. This was due to the company’s aggressive price cuts in markets such as the United States and China to boost demand and combat increasing competition.
After the trading hours ended, the stocks of the automaker based in Austin, Texas, witnessed a decline of 6%. During a conference call with analysts, Musk stated that it is more beneficial to sell a significant number of cars at a lower margin and gain profit in the future as the autonomy is perfected. He also highlighted that despite the uncertain economic conditions, the company has received more orders than its production capacity.
Jesse Cohen, a senior analyst at Investing.com, expressed concerns about Tesla’s sales numbers in China. This suggests that the demand for Tesla’s vehicles is decreasing more than anticipated due to the increasing competition from local electric vehicle (EV) companies. Elon Musk, who had previously expressed his desire to achieve 2 million vehicle deliveries this year, did not confirm this during Wednesday’s announcement. However, he remained committed to the company’s official target of 1.8 million deliveries.
In a statement, Tesla expressed confidence in maintaining the highest operating margin among major automakers. However, the company fell short of market predictions with a total gross margin of 19.3%, as reported by 14 analysts surveyed by Refinitiv. Tesla did not disclose its automotive gross margin, a crucial metric for investors, due to economic difficulties making it challenging to provide accurate outlooks, according to Musk.
In the first quarter, the company’s automotive gross margin, which excludes regulatory credits, dropped to 19% from the previous quarter’s 24%, as per Reuters’ calculation. Tesla reported a decline in its average selling price in the first quarter compared to the previous year, but no further details were provided.
According to experts, Tesla may be compelled to further reduce prices as it faces stiff competition, particularly in China, despite opening new factories in Berlin and Texas to increase car production. Tesla’s inventory reached an all-time high of $14.38 billion in the first quarter, compared to $6.69 billion in the previous year. Despite generating a $1.6 billion gain from investment maturities, the company still incurred a cash burn of $154 million during the quarter, which could have been higher if not for the investment gain.
NEW MODELS
In 2020, Musk revealed his intention to manufacture a novel battery cell to reduce the cost of the priciest component of an EV by half. However, the company has been facing difficulties in accelerating the production of those cells.Tesla strives to reduce assembly expenses by 50%, but has not specified a timeline for introducing the eagerly anticipated low-priced electric vehicles. For a while now, Tesla enthusiasts have been yearning for the company to modernize its outdated range of models.
In January, Musk made an announcement that Tesla would begin producing Cybertruck during the summer, but full-scale production would not start until next year. During a call on Wednesday, Musk stated that he anticipates a delivery event for Cybertruck to take place in the third quarter. Tesla’s net profit decreased by almost 25% to $2.51 billion compared to the previous year due to increased costs for raw materials, logistics, and warranty, as well as the production expansion of its 4680 battery cells.
The income that has been modified to account for one-time occurrences and the revenue generated were consistent with the predicted values from Refinitiv.
>Read more:Tragic Loss: K-pop Industry Mourns the Sudden Death of Astro’s Moon Bin at Just 25 Years Old
