Tesla’s second-quarter shipments were up 83% from a year ago after the company slashed the prices of its four electric vehicle models several times and buyers took advantage of tax credits from the U.S. government.
The Austin, Texas, maker of EV, solar panels and batteries said on Sunday it sold a record 466,140 vehicles worldwide from April to June, nearly doubling the 254,695 it sold in the same period a year earlier. The vast majority of sales were Tesla’s popular Model 3 and Model Y versions.
But the price cuts, both for special orders and existing inventory, raised questions among analysts who expect the cuts to reduce Tesla’s profit margins when it announces second-quarter results on July 19.
Tesla sales beat Wall Street expectations. Analysts polled by data provider FactSet expected shipments of 445,000 for the quarter.
The company produced 479,700 vehicles from April to June, about 13,000 more than it sold, suggesting stocks may be building up.
Second-quarter sales bring Tesla to nearly 900,000 vehicles in the first half of this year. The company sold 422,875 vehicles from January to March.
CEO Elon Musk has predicted that sales will grow by about 50% per year for the foreseeable future. To reach that number for the full year, the company would need to sell 1.97 million vehicles. Analysts expect Tesla to fall a bit short, shipping 1.82 million vehicles this year.
Tesla cut prices in the US at least four times during the quarter for vehicles ordered by customers. Towards the end of the quarter, mid-June, larger price declines occurred in retail inventory. The company slashed prices on some Model 3 cars by more than $3,000. Model X SUV price cuts reached more than $10,000, and the company dropped three years of free charging for the S and X. The Model S sedan saw cuts of about $7,500.
In fact, prices of the Model Y small SUV, Tesla’s best seller, were slashed by a whopping $1,570 in an effort to move vehicles around at the end of June.
But sales were almost certainly boosted by a $7,500 U.S. government tax credit from the Inflation Reduction Act that was available on nearly all Tesla models in the second quarter.
Wedbush analyst Dan Ives said price cuts have boosted sales, especially in China, but there will be a price to pay for lower profit margins. He expects Tesla’s margins to bottom out in the next two quarters and return to normal levels next year.
“We’ll likely see the price cuts weigh on margins,” said Morningstar analyst Seth Goldstein.
Tesla’s automotive gross profit margin (excluding regulatory credit income), the company’s gross profit compared to sales, was a whopping 30% early last year. But as interest rates rose, Tesla started cutting prices last year, and the margin fell to 19% in the first quarter. Analysts expect 16.9% from April through June, according to FactSet.
Ives said Tesla stock in the US is starting to grow. “That’s going to be a bit of an overhang in the second half of the year,” he said.
Deliveries, he said, are not the whole Tesla story. With General Motors, Ford, Rivian and Volvo announcing that they will join Tesla’s charging network and use the plug, Tesla will get millions in charging revenue.
“I do believe that investors are beginning to appreciate the sum of the parts,” Ives said.
Tesla shares have more than doubled in value this year, largely on the news of General Motors and Ford joining the company’s charging network. Tesla shares closed at $261.77 on Friday.
Goldstein expects Tesla to ramp up production at new plants in Austin, Texas and in Germany, further reducing the company’s fixed costs. “I think we’re probably looking at the bottom in the first half of this year, and then margins will recover somewhat,” he said.
(This story has not been edited by News18 staff and was published from a syndicated news agency feed – Associated Press)
