Shares of Tesla (TSLA) fell after the electric
vehicle maker reported slightly lower than
expected revenue and profit for the first
quarter. The company's gross margin also
dipped below 20% to 19.3%, which Tesla
attributed to the cost of recent price cuts. The
Q1 revenue of $23.33 billion was just slightly
below the estimated $23.35 billion, while
adjusted EPS of $0.85 missed the Street's
estimate of $0.86. Despite the dip in revenue
from Q4 2022, the company's Q1 revenue still
represented a 24% increase from the same
period the previous year.
Tesla attributed the dip in profitability to
margin compression, which may have been
caused by the price cuts implemented in Q1.
The company reported adjusted net income of
$2.9 billion, which was less than the $3.03
billion estimated by the Street, and $700
million less than a year ago. Despite the dip in
profitability, Tesla remains focused on cost
reduction, including improved production
efficiency and lower logistics costs.
Looking ahead, Tesla remains confident in its
global production of 1.8 million vehicles for
2023, with its long-term delivery growth rate
remaining at 50%. The company is also on
track to begin production of its Cybertruck
later this year at its Giga Austin facility, with
test versions already in production.
Tesla has implemented several price cuts in
the US, Asia, and some European markets in
2023. The gross margin dip to 19.3% may
reflect the costs of these price cuts. Yesterday,
Tesla announced yet another round of price
cuts, with the Model 3 and Model Y EVs seeing
their prices slashed yet again. These latest cuts
come as the federal government limits the
number of vehicles eligible for the electric
vehicle tax credit.
Analysts are cautious about the impact of
these price cuts on Tesla's profitability. Ryan
Brinkman of JPMorgan is particularly wary,
noting that these cuts are likely to have a more
negative impact on pure-play battery electric
automakers such as Rivian, which do not have
other profit centers to offset their losses.
Investors and analysts will be closely watching
Tesla's post-earnings conference call for
updates on Cybertruck production, progress on
the gen 3 platform, and the timeline for
construction of the company's latest
gigafactory in Mexico. They will also be
looking for any indications of how Q2
deliveries are tracking and whether the order
backlog is growing.
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