Tesla Earnings Expected to Show Impact of Elon Musk’s Price Cuts
Tesla has reduced U.S. prices for its electric vehicles by between 14% and 25% this year. Photo: Cfoto/Zuma Press By Rebecca Elliott April 19, 2023 5:30 am ET Wall Street has one key question ahead of Inc.’s first-quarter earnings: How much have recent price cuts hurt the company’s bottom line? Elon Musk’s electric-vehicle maker has lowered prices for models in the U.S. by between 14% and 25% this year as it contends with weaker demand, higher interest rates and burgeoning competition. The latest round of reductions came overnight. Tesla’s earnings, due after Wednesday’s market close, are expected to shed light on how those cuts are affecting how much money the company makes on each car it sells. Photos: The EV Rivals Aiming for Tesla’
Tesla has reduced U.S. prices for its electric vehicles by between 14% and 25% this year.
Photo: Cfoto/Zuma Press
Wall Street has one key question ahead of Inc.’s first-quarter earnings: How much have recent price cuts hurt the company’s bottom line?
Elon Musk’s electric-vehicle maker has lowered prices for models in the U.S. by between 14% and 25% this year as it contends with weaker demand, higher interest rates and burgeoning competition. The latest round of reductions came overnight.
Tesla’s earnings, due after Wednesday’s market close, are expected to shed light on how those cuts are affecting how much money the company makes on each car it sells.
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Analysts surveyed by FactSet expect Tesla’s first-quarter profit to fall to $2.6 billion, from $3.3 billion a year earlier, despite higher revenue. Sales are expected to reach around $23.6 billion for the first three months of the year, up from $18.8 billion the year before.
Tesla’s operating margin, a measure of profitability, is among the highest in the auto industry, having clocked in at 16.8% last year. Co. ’s operating margin was around 4% in 2022, and Co. ’s was around 6.6%, according to FactSet.
Tesla has returned prices for its two most-popular vehicle configurations in the U.S. to 2021 levels, when the company’s annual operating margin was 12.1%. Analysts surveyed by FactSet expect Tesla’s operating margin fell back to around that level in the first quarter.
Tesla’s price reductions jolted sales, at least initially. “We currently are seeing orders at almost twice the rate of production,” Mr. Musk, the company’s chief executive, said in January after the company implemented a round of steep price cuts.
Tesla produced almost 18,000 more vehicles than it delivered to customers in the first quarter, and it continued to cut prices this month. The reductions have stoked concern among investors that Tesla won’t be able to maintain its growth without further cuts.
“The fact that Tesla is cutting price on its longest lead time model suggests other price cuts are likely to follow,” Bernstein Research analyst Toni Sacconaghi Jr. said in a recent note to investors, prior to Tesla’s latest cuts.
In the U.S., Tesla lowered the price of what Bernstein estimates is its most popular vehicle—the long-range Model Y crossover—by $2,000 earlier this month and another $3,000 overnight. That configuration now costs $49,990, before taxes and fees.
Tesla didn’t respond to a request for comment. Its stock, which closed Tuesday at $184.31, is up around 50% this year after a challenging 2022.
Photo illustration: Mike Cheslik
Tesla delivered 422,875 vehicles in the first quarter, up 36% from the year before. Model 3 sedans and Model Y crossovers, Tesla’s more-affordable offerings, made up nearly all of those deliveries.
A new U.S. law, the Inflation Reduction Act, provided Tesla an extra boost. Beginning in January, many buyers of Tesla’s two most-popular models were eligible for a $7,500 federal tax credit. The available credit fell by half this week for Tesla’s most-affordable Model 3 car because new, stricter requirements went into effect.
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Tesla has suggested that it aims to deliver some 1.8 million vehicles this year, or around 37% more than it did in 2022.
To support its longer-term growth, the company is planning a new manufacturing plant near the industrial hub of Monterrey, in northern Mexico, and a new battery factory in Shanghai.
Tesla currently sells four passenger models. It has been working to bring the Cybertruck pickup to market later this year and has teased another, more-affordable car.
Write to Rebecca Elliott at [email protected]
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