Tesla reported a first-quarter sales beat on Wednesday, but its stock still fell over 8% during the regular trading session.
Tesla sales beat analyst estimates by $120 million, but earnings fell in line with consensus estimates at 85 cents per share, according to Benzinga.
The automaker’s recent price cuts of between 14% and 25% as it competes with an increasingly competitive EV market led to a 24% decline in first-quarter profits, according to The Wall Street Journal.
“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin,” Tesla CEO Elon Musk said on the Q1 earnings call.
Musk added that he expects Tesla will be able to generate significant profit over time through its autonomous driving capabilities. The CEO said he would prefer to get as many Tesla cars out on the road as possible and then profit through future over-the-air software updates.
“So, we do believe we’re like laying the groundwork here, and then it’s better to ship a large number of cars at a lower margin and, subsequently, harvest that margin in the future as we perfect autonomy. This is an extremely important point,” he added.
Tesla’s price cuts initially led to higher sales, and orders are now “in excess of production,” Musk said.
In the short term, the price cuts expectedly weighed on first-quarter profits, which fell to $2.5 billion, down $800 million year-over-year, according to the WSJ.
Tesla’s profit margin shrunk to 11.4% in the first quarter, down from 19.2% in the first quarter of 2022, but it still has some of the highest margins in the industry.
Comparatively, Ford’s operating margin was around 4% in 2022, while General Motors saw operating margins of 6.5% in 2022, according to FactSet data reported by the WSJ.
Revenues were 24% higher year over year for Tesla in 2022, increasing to $23.3 billion.
Tesla indicated that it would continue to evaluate price cuts.
“As many car makers are working through challenges with the unit economics of their EV Programs, we aim to leverage our position as a cost leader,” the company said, per the WSJ.
One day before Tesla’s report, the company cut prices for the sixth time in 2023, according to CNBC.
“The fact that Tesla is cutting price on its longest lead time model suggests other price cuts are likely to follow,” said Bernstein Research analyst Toni Sacconaghi Jr. in an analyst note to investors prior to the price cuts on Tuesday, according to the WSJ.
Tesla has already dropped the price of its most popular vehicle, the long-range Model Y, by $5,000 this month to $49,990, per the WSJ.
The Tesla CEO said that his company’s direct-to-consumer model gives it the advantage of real-time sales insight, which informs the company on demand and helps set its pricing strategy, a luxury that other automakers that sell through dealerships do not have.
“Every day, we get a daily real-time update of how many cars were ordered yesterday, how many cars were produced yesterday,” Musk said.
“The other car companies, they will make the cars, send them to the dealers, then the dealers will sell the cars. And then it takes quite a long time for them to get the data back to actually figure out how many cars were sold, whereas we know how many cars were ordered yesterday throughout the world. So our finger’s on the pulse is real-time and does not have latency, whereas other car companies have a lot of latency in their data.”
The company delivered 422,875 vehicles in the first quarter, a 36% jump year over year. Tesla plans to deliver 1.8 million vehicles in 2023, a 37% increase from 2022, per the WSJ.
Go to the 14 minute mark of the “Mike Jones Investment” Channel video (entitled “Crazy Week Ahead – This Will Absolutely Move Markets This Week, Plus Pay Close Attention to……”)
He gives an excellent, honest overview of TESLA and talks about Cathie Woods (with clip), Ark Invest and where Cathie sees sees Tesla stock at $2,000 on $600B robotaxi business.
Mike again plays a short clip at the 7:45 mark. If people play the market, they should watch Cem talk about the Vix.
https://www.youtube.com/watch?v=LbwKkoF78eU