The flip side of falling prices - Tesla profits plummet 24% and shares plummet 6%

Tesla has reduced the price of electric cars several times since the start of 2023, including twice in April. The Model Y and Model 3 recently dropped in price by $3,000 and $2,000, respectively. Expectedly, this policy has had a bad effect on the financial results.

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Tesla has relatively large margins, so it can easily reduce the cost of electric cars, leaving no chance for competitors. It is possible that this approach will eventually achieve its goal of delivering 1.8-2 million cars during 2023. The company was able to sell more than 400,000 electric cars in the first quarter, setting a new record.

The increase in sales naturally led to an increase in revenue. Thus, Tesla's revenue for the first quarter grew 24% over the same period in 2022 to $23.3 billion. Moreover, the company has a profit margin of 19.3%, which is a market record.

Lower prices are boosting sales and revenue, but have a negative impact on net profit. It is down 24% from the benchmark period to $2.5bn. Investors, of course, are not happy about this.

Despite attempts by Tesla representatives to argue that the company will keep its profit margin above 20% in the long run, the negative dynamics do not bolster investor confidence. Last year's profit margin was 29.1% and now it's 19.3%, as we wrote above. The operating profit margin has fallen from 19% to 11.4%.

Tesla generated $19.96 billion in electric vehicle sales in the reporting period, up 18% from last year. Environmental credit sales fell from $679 million to $521 million. Elon Musk believes the volatile period will drag on for a year.

By the end of March 2023, the company was able to accumulate over $22bn in free cash. By the end of 2024, capital expenses will reach $7 billion, and in another year will increase up to $9 billion. After the report publication Tesla shares fell by 6%.

Source: Tesla