This number made investors sit up and take notice: Tesla delivered around 466,000 vehicles worldwide in the second quarter of this year – exceeding its own expectations. In no other three-month period before has Elon Musk’s electric car maker sold so much. There was a reason for this: in the past few months, Tesla has given some models hefty discounts to boost sales.
Now the price of this strategy is showing. Because the carmaker was less profitable in the second quarter than before, as the company announced on Wednesday afternoon (local time). Gross margin fell to 18.2 percent from 19.3 percent in the previous quarter. That’s the lowest reading in 16 quarters. Tesla’s profit margins have long been the envy of the rest of the auto industry. After the market closed, the share fell by more than four percent at times.
Between the beginning of the year and the end of April alone, Tesla reduced the prices in the USA for some models six times. The acquisition costs for the Model 3 fell by a total of eleven percent, those of the Model Y by as much as 20 percent. Tesla also drastically reduced the prices for its vehicles in other markets, including in Europe and Asia. The company was also confronted with weakening demand there.
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The consequences of the discount battle, however, were record deliveries. The Inflation Reduction Act (IRA) also provided an additional boost in the home market. As part of the US subsidy package worth hundreds of billions, buyers get a tax bonus of up to $7,500.
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And so Tesla was able to surprise despite weakening profitability. Quarterly sales rose to an all-time high on record sales. Revenue jumped 47 percent year-on-year to $24.9 billion. Experts had previously expected slightly lower sales.
As expected, profit growth was more subdued with an increase of 20 percent to $ 2.7 billion – but Tesla was able to exceed analysts’ forecasts here as well. “We are thrilled to have achieved such results given the current macroeconomic environment,” the company said.
Other manufacturers are also lowering their prices
And Tesla is by no means alone in facing the price problems. Other car manufacturers also feel compelled to reduce the purchase costs of their electric models for consumers. Against shrinking sales in China, Volkswagen recently offered its smallest electric model ID.3 there for the equivalent of 16,000 euros. The Wolfsburg company sees itself increasingly exposed to tough competition in the Far East, especially from domestic low-cost manufacturers such as BYD.
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However, analysts estimate that the time for discounts could soon be over. “I assume that the price cuts for the existing models are essentially complete,” predicts analyst Gary Black with regard to Tesla’s future pricing. At best, he is still counting on discounts in order to reduce excess stocks.
Instead, Black anticipates that Tesla will soon launch its next-generation vehicle, a possible Model 2, between $25,000 and $30,000. The expert writes that the brand will then finally be accessible to the general public. Tesla boss Musk had already announced corresponding plans at the investor day in March of this year.
Tesla wants to share its technology
The company also announced over the weekend that it had completed the first “cybertruck” at its gigafactory in Texas. The electric pickup model has been haunting the car world for four years: At that time, Tesla presented the Cybertruck as a concept study. The start of production was originally planned for 2022. But the electric car manufacturer could not keep this date.
Analysts believe that the next milestone has been reached in the first model that has now been produced. However, regular mass production is not expected to begin until next year. In the growing pickup market, Tesla has recently fallen behind. Competitors such as Ford with the F-150 Lightning or General Motors with the Hummer EV have long since brought comparable models onto the market.
Musk is said to have told analysts on Wednesday that he intends to license his “Full Self-Driving” (FSD) driver assistance technology to another major automaker. One is already in talks with a large corporation, whose name Musk did not want to name.
“Tesla Energy is still underestimated”
But here, too, Tesla has suffered severe setbacks in recent months. In the USA, the group recently recalled more than 360,000 vehicles with the beta version of its assistance software. A technology on which Musk believes the success of electric cars depends.
In the shadow of e-cars, however, another business area is developing into a profit maker for the group: the Tesla Energy energy division. Although sales of solar systems have recently declined, business with energy storage is flourishing. For example, Tesla reported a 222 percent increase in storage installations for the second quarter compared to the same period last year. The company reported sales of around $1.5 billion – significantly more than the $866 million from the same quarter last year.
“Tesla Energy is still underestimated,” writes analyst Sawyer Merritt on Twitter. At 18.4 percent, the gross margin of the energy sector in the past quarter even exceeded the range in the automotive sector for the first time. Investor Ross Gerber commented on Twitter: “Growth will continue, although the division is rarely the focus.”
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