11 months ago • 2 mins
Tesla rode high on record quarterly deliveries – but its profit could be an accident waiting to happen.
What does this mean?
After a lackluster end to 2022, Tesla began this year with a “new year, new me” mindset. So while we resolved to cut calories, Tesla opted to cut prices – offering discounts in all markets, of up to 20%. And sure, that turned out to be a bit of a self-own in China, but the move did give global deliveries a boost: Tesla sent out nearly 423,000 EVs last quarter, outpacing some analysts’ predictions and setting a new quarterly record. But there’s a snag: that's only a 4% uptick from the previous, underwhelming quarter, amounting to 36% growth from the same time last year. And that’s left Elon Musk – who reiterated his famous 50% growth goal back in January – with more than a little egg on his face.
Why should I care?
The bigger picture: Pricey plunge.
Tesla’s problems are spelled out pretty clearly in the fine print. See, while deliveries of bread-and-butter Model 3 and Y EVs grew from the quarter before, its pricier (and more profitable) models actually took a nosedive – a sign of a gloomy economy and consumer belt-tightening. Factor in the Pandora’s box Tesla’s opened by starting a price war, and the firm could be forced to slash prices even further.
For markets: Keep an eye on shares.
Tesla's stock has been on a roll this year, almost doubling as investors applauded Musk's push for growth and his production ramp-up. But the stock's future could hinge on how much these efforts have eaten into profit margins – something investors will learn later on this month. And that’s worth watching out for: the company’s already warned that it's ready to prioritize growth over profit – and while Tesla’s high margins mean the firm can afford to cut prices, hitting profit too hard could make even dyed-in-the-wool Musk fans jump ship.
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