Tesla will shoot for volume over profit: Elon Musk

Tesla missed market estimates for first-quarter total gross margin after cutting prices in the US and globally.

The electric vehicle maker reported a total gross margin of 19 percent, compared with an expectation of 22 percent from analysts polled by Refinitiv, Reuters reported. Net income during the most recent period dropped 24 percent to $2.5 billion.

Tesla reported global deliveries of 422,875 in the first quarter, a 4.3 percent increase compared with the previous quarter. That small growth suggests price cuts were necessary to maintain momentum amid rising EV competition and higher interest rates.

The EV maker likely sold 161,630 vehicles in the US in the January-March period, according to an estimate from Cox Automotive, for a 25 percent increase compared to a year earlier. Tesla doesn’t break out US sales.

Tesla is also eligible for new EV tax incentives of up to $7,500. Its bestselling Model Y that was priced just over $65,000 last year without access to tax incentives is now just over $50,000 with the incentive available.

Analysts say the price cuts are good for juicing volume but could hurt the brand over time.

“Ongoing price cuts and the latest federal tax credit rules are making Tesla’s intended mass-market vehicles, Model 3 and Model Y, far more attainable,” said Jessica Caldwell, executive director of insights at Edmunds. “In the long term, however, Tesla is walking a razor’s edge between maintaining its brand prestige while simultaneously attempting to grow volume.”

Musk also said on the earnings call that Tesla is preparing to launch its Cybertruck this year and will probably have a delivery event in the third quarter. The automaker’s year-old Texas factory is tooling up to make the pickup.

“There’s a tremendous amount of demand for the product, obviously,” Musk said. “It is, in my view, a fantastic product, a hall of famer. But as with all new products, it takes time to get the manufacturing line going.”

Tesla also said it is making headway on lean up production for an in-house battery cell, called the 4680 for its dimensions in millimeters.

Tesla said profitability was weighed down by higher costs for raw materials, logistics and underutilization of new factories.

The company reported first-quarter revenue jumped 24 percent to $23.3 billion, just above a consensus estimate of $23.2 billion, Reuters said.

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