Tesla Inc (TSLA.O) CEO Elon Musk said the electric vehicle (EV) maker would prioritize sales growth over profit in a sluggish economy.
As it cut prices in the US and China to boost demand and stave off competition, the company missed market projections and had its lowest quarterly gross margin in two years.
Austin-based automaker shares fell 6% after hours.
“It’s better to shift a large number of cars at lower margin and harvest that margin in the future as we perfect autonomy,” Musk told analysts on a conference call. Despite economic uncertainty, the EV maker’s orders outpaced output.
On Wednesday, Musk declined to reaffirm his earlier goal of 2 million vehicle deliveries this year but maintained the company’s 1.8 million aim.
“Tesla’s worrying China sales figures indicate demand for its vehicles is slowing more than expected in the face of rising competition from local EV companies,” said Investing.com senior analyst Jesse Cohen.
Tesla stated its operating margin would remain the highest among significant carmakers.
The company’s 19.3% gross margin fell short of Refinitiv’s 14 analysts’ 22.4% forecast.
Musk said the sluggish economy made forecasting Tesla’s automotive gross margin difficult, which investors carefully follow.
According to Reuters, the first-quarter automotive gross margin was 19% excluding regulatory credits, down from 24% the previous quarter.
Tesla reported a drop in its average selling price in the first quarter on Wednesday, but it did not clarify.
As its new Berlin and Texas facilities produce cars, analysts think the EV maker may need to slash costs more due to a price war, especially in China.
Tesla’s first-quarter inventory rose to $14.38 billion from $6.69 billion.
It burned $154 million in cash during the quarter but gained $1.6 billion from “proceeds from maturities of investments.”
Musk announced in 2020 that he would produce a new battery cell to halve the cost of an EV’s most expensive portion, but production has been slow.
Tesla plans to decrease manufacturing costs by half but has not announced when it will launch inexpensive electric cars. However, Tesla supporters have long wished for a model facelift.
Musk claimed in January that Tesla would begin Cybertruck production this summer but not in volume until 2019.
Musk predicted Cybertruck’s third-quarter delivery on Wednesday’s call.
Due to increasing raw-material, logistical, and warranty expenses and the production ramp-up of its 4680 battery cells, Tesla’s net profit plummeted roughly 25% to $2.51 billion.
Revenue and income adjusted for one-time items met Refinitiv projections.
Comment Template