Elon Musk, CEO of Tesla Inc, has reaffirmed
his commitment to prioritize sales growth over
profit, stating that the company would rather
sell a large number of cars at lower margins
and harvest the profits in the future. The
announcement comes as the electric vehicle
(EV) maker posted its lowest quarterly gross
margin in two years, falling short of market
estimates, after slashing prices aggressively in
the US and China to spur demand and fend off
rising competition.
Despite the uncertain economic climate, Musk
announced that Tesla's orders exceeded
production, but did not confirm his previous
goal of achieving 2 million vehicle deliveries
this year. Instead, the company's official target
of 1.8 million deliveries remains unchanged.
However, Tesla's sales figures in China have
been a cause for concern, indicating a
slowdown in demand, according to Jesse
Cohen, senior analyst at Investing.com.
Tesla still believes that its operating margin
will remain the highest among big carmakers,
but its total gross margin of 19.3% fell short of
market expectations of 22.4%. The company
did not report its automotive gross margin, a
figure closely watched by investors, citing the
weak economy as a hindrance to providing a
margin outlook.
Tesla may need to cut prices further to remain
competitive, given the price war in the EV
market, especially in China, where local EV
companies are increasing competition. The
company burned $154 million in cash during
the first quarter, and although it reported
record inventory of $14.38 billion, up from
$6.69 billion a year earlier, it would have
consumed more cash if not for a $1.6 billion
gain attributed to "proceeds from maturities of
investments."
Musk announced plans in 2020 to produce a
new battery cell to halve the cost of the most
expensive part of an EV, but the company has
been struggling to ramp up production for
those cells. Tesla aims to cut assembly costs by
half, but has not given a timeline for the
release of its long-awaited affordable electric
vehicles. The company's net profit fell by
nearly a quarter to $2.51 billion from a year
earlier, hurt by higher raw-materials, logistics,
and warranty costs as well as the production
ramp-up of its 4680 battery cells.
Despite the challenges, Musk remains
optimistic about Tesla's future and expects a
delivery event for the Cybertruck in the third
quarter.
Social Plugin