Tesla profits, gross margin fall in Q1

Tesla Inc. missed market estimates for first-quarter total gross margin on Wednesday, throttled by a series of aggressive price cuts meant to spur demand in a sagging economy and fend off rising competition.

The EV maker’s net income during the latest period dropped 24 percent to $2.51 billion. 

Tesla reported total gross margin of 19.3 percent, compared with expectations of 22.4 percent, according to analysts polled by Refinitiv.

The electric-vehicle maker lowered sticker prices four times in the United States between January and March, sacrificing industry-leading margins to maintain dominance in the U.S. and catch up with rivals in China  its second-largest market.

But a murky economic outlook meant that Tesla CEO Elon Musk’s plan to ride out a recession with price cuts and lower production costs was not enough to make up for strained consumer spending on big-ticket items. Tesla deliveries in the first quarter rose 4.3 percent from the fourth quarter.

The company reported first-quarter revenue jumped 24 percent to $23.33 billion, just below a consensus estimate of $23.21 billion, according to 14 analysts polled by Refinitiv.

Tesla CFO Zachary Kirkhorn promised in January that Tesla would not go below margins of 20 percent and an average selling price of $47,000 across all models.

Tesla said its operating margin was 11.4 percent in the three-month period, down from 16 percent last quarter and 19.2 percent a year earlier. The carmaker downplayed concern about its recent price cuts, saying its operating margins fell “at a manageable rate.”

The electric-vehicle maker has slashed prices several times in the United States, China and other markets since late last year, as Musk said Tesla could sacrifice its industry-leading margins to drive volume growth during a recession.
 

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