The impact of Tesla’s strategy of slashing the prices for its electric vehicles to drive up demand has been revealed in its latest quarterly results, with the company’s gross margin taking a 977 basis points hit.
This sent the electric vehicle maker’s stock lower in after-hours trading, down 4% at US$173.40 shortly following the release of its results.
For the first quarter, the company said its gross margin narrowed from 29.1% in the year-ago quarter to 19.3%, below the Street's expectation of 21.2%. Its operating margin decreased to 11.4% from 19.2% in the same quarter last year, a 779 basis point decrease.
However, revenue revved higher, up 24% from the year-ago quarter to $23.3 billion, below the Street’s expectation of $23.56 billion.
Net income came in at $2.9 billion, below the expected $3 billion, and adjusted earnings per share were in line with expectations at $0.85.
Tesla noted that its operating margin reduced at a “manageable rate” as the result of its price cuts on many vehicle models across regions during the quarter.
"We expect that our product pricing will continue to evolve, upwards or downwards, depending on a number of factors," the company said.
“We expect ongoing cost reduction of our vehicles, including improved production efficiency at our newest factories and lower logistics costs, and remain focused on operating leverage as we scale."
First published: 04/19/23, 16:41 ET
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