Tesla released its results for the first quarter of 2023, where it reported $2.9 billion in net income and $23.3 billion in revenue. Despite good numbers, the company’s gross profit fell to 19.3%, showing that the recent price decline has affected earnings.

Tesla announces third price cut for the company’s electric vehicles

The value is the difference between revenue and cost of goods sold, and the result was affected by the recent price cuts for Model Y and Model 3 electric vehicles. in the last quarter of 2022, the company’s gross margin was 25.60%. However, the company is not concerned about the decline in revenue and claims that lower production costs will help the company grow. Tesla said in a letter to investors:Despite lower prices for many vehicle models across all regions in the first quarter, our operating margins declined at a reasonable pace. We expect further reductions in the cost of our vehicles, including improved production efficiency at our new plants and reduced logistics costs, and we remain focused on operating leverage as we grow.“.

The decline is within operating margins, reduced to a “manageable rate”, and in line with the company’s expectations, Tesla said. With reduced production costs, more efficient production and logistics Tshe expects to deliver better results next quarter, even with price cuts.

Price war in the electric segment

The constant price cuts have sparked a kind of “price war” in the electric vehicle segment, with competitors like Ford, GM, Volkswagen having to adjust to Tesla’s move. As Tesla began building a battery megafactory in Shanghai, China, CEO Elon Musk unveiled the company’s master plan. With increased investment in energy storage solutions such as Megapack batteries.

According to Dan Ives, analyst at Wedbush, the price cut was the perfect moment for Tesla to put pressure on the market and stay on top. “We remain firmly convinced that Tesla’s aggressive price cuts were a good time for Musk to ‘take off the Band-Aid’ to protect his EV territory and put up an iron fence around his established consumer base.” Despite this, Ives argues that persistent price cuts and revenue cuts are adding to pressure on the company’s performance through the end of 2023. It remains to be seen if Elon Musk’s company will be able to increase revenue while keeping the prices of its cars low. .

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Source: Edge

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