Elon Musk’s electric vehicle company, Tesla, revealed a decline in first-quarter earnings on Wednesday as price cuts spurred demand but hurt profit margins.
On $23.3 billion in revenues, up 24 percent from the prior period, profits of $2.5 billion were recorded.
The figures, which revealed a smaller profit margin than anticipated but were in line with Wall Street estimates for earnings per share, caused shares to drop.
Tesla has reduced prices on a number of models in the United States during the past 24 hours, most recently in response to increased EV competition from other automakers in 2023.
The business claimed that its profit margins had been reduced at “a manageable rate,” pointing to a “unique opportunity for Tesla” while indicating that further price reductions will soon take place.
As competitors ramp up, Tesla has claimed that its competitive advantage in the EV industry makes it “a cost leader.”
Musk explained the price reductions in a conference call with analysts as being tied to macroeconomic circumstances, adding that the goal was to sell more cars, even at reduced profit margins.
Musk pointed to the Federal Reserve’s string of interest rate increases as de facto price hikes, adding that worries about a recession and job loss mean “people will generally postpone a big purchase like a new car.”
However, as a result of the price reductions, Tesla’s operating margin dropped from 16 percent in the previous quarter to 11.4 percent.
On the conference call, questions on the outlook for profit margins were repeatedly directed at Musk and other Tesla officials. However, they refrained from announcing a target, claiming that it is partially dependent on variables outside their control, such as the cost of important commodities.
