The price cuts that Tesla has engaged in to maintain its dominance in the market weigh on the results. In the first quarter it earned 2,510 million dollars -2,300 million euros-, 24% less than in the same period last year. Gross margin has contracted to the worst level in two years, to 19.3%, below market forecasts of 22.4%.
The company’s shares fell about 10% on Thursday, as the company made it clear that it will prioritize growth in sales and not profit.
Revenues increased by 24% year-on-year in the first quarter, to 23,330 million dollars -21,340 million euros-, in line with what was expected by the market. In recent months the company has embarked on a campaign of sharp price cuts in the US, Europe or China to prevent the growth of its competitors. The average sales price is 46,850 dollars per car, somewhat below 43,000 euros, compared to 52,100 a year ago.
The strategy would allow it to maintain its leadership position in the electricity market. Deliveries grew 36%, to 422,875 vehicles. You maintain sales, but in return you earn less money per unit.
Elon Musk, CEO, stated that the price war has not ended because the priority is to grow sales rather than profit. “It’s better to move a lot of cars with smaller margins and reap that margin in the future while we refine the range (of the cars),” Musk argued in a meeting with analysts. While he acknowledged the uncertainty in the economy, he said orders are outpacing production today. It is something that did not happen in the quarter, in which he manufactured 18,000 more cars than those sold, showing some relaxation in demand.
Regarding the fall in margins that occurs along the way, the company has not published a similar metric that analysts tend to follow closely, alleging economic weakness in order not to publish it.
