LA Private

Price cuts put the brakes on Tesla earnings

Tesla price cut itself into a slide in earnings in the first three months of 2023 as the electric vehicle giant tried to fight off rising challenges from Chinese, European and fellow American EV makers.

And the succession of price cuts (at least three in the quarter) have continued into April with two in a few days, pointing to what could be a repeat performance in the three months to June.

And CEO Elon Musk made it clear in an after-market briefing that the company wants to drive sales and market share and not earnings.

Musk said Tesla will ‘invest in growth as fast as possible’ after slashing prices six times this year to boost demand – though the final two cuts this month have been made to make sure the company’s best-selling models in the US can maximise purchase subsidies under new rules that started on Tuesday.

Investors didn’t like the numbers and sent the shares down nearly 4% in afterhours trading (the results came after the bell on Wednesday).

After the 65% slump in 2022, driven by Musk’s ill-fated $US44 billion takeover of Twitter and sales of Tesla shares to finance that deal, the shares have rebounded around 48% so far this year on hopes of stronger sales and earnings.

But faced with rising challenges in the market place and a tough new subsidy regime in the US, Tesla cut the prices of its EVs at least three times in the quarter – with two more in April alone, the latest on Tuesday just before the release of the figures.

Tesla said revenue for the quarter totalled $US23.33 billion, up slightly from the $US23.21 billion forecast and up 24% from the $US18.756 billion in the first quarter of 2022.

But net income slumped 24% to $US2.51 billion, down 24% from last year’s $US3.318 billion. Tesla stressed the non-standard performance (called non-GAAP or non-Generally Accepted Accounting Principles) figures which showed earnings of $US2.9 billion, still down 22% from a year ago.

In its results statement, Tesla said the “underutilization of new factories” stressed margins, along with higher raw material, commodity, logistics and warranty costs, and lower revenue from environmental credits, all contributed to the drop in earnings from last year.

Automotive revenue, Tesla’s core segment, reached $19.96 billion in the quarter, up 18% from last year. That’s because more EVs were sold in the quarter than a year ago.

Tesla Energy saw revenue soared to $US1.53 billion, up 148% compared to the same period last year as it sold more batteries. Tesla’s energy storage systems deployment increased to 3.9 gigawatt hours, or by 360% the company said.

These lithium-ion battery-based energy storage systems, made by Tesla, include the home backup battery, called the Powerwall, and the utility-scale Megapack system which enables utilities to store and use more energy generated from renewable, but intermittent, sources like solar and wind.

Tesla has ambitious plans for expansion and increased capital expenditures.

Tesla currently sells four EV models, which are produced at two vehicle assembly plants in the U.S., one in Shanghai and another outside of Berlin.

Meanwhile Tesla says work will start next month on its new lithium refinery in Texas.

Tesla executives said on Wednesday’s earnings call that after filing for approvals last September the company has the go ahead to start work on what will be the first of its kind in North America.

The refinery is in the Corpus Christi, Texas, area, nearby the major Corpus Christi port.

Musk did say in the call that lithium prices had eased since he was last on the call.

Tesla has said it expects the refinery to reach commercial operations by the end of 2024.