Tesla’s second-quarter deliveries jumped 83% from a year earlier after the company cut prices of its four electric vehicle models several times and allowed buyers to take advantage of US government tax credits.
The Austin, Texas, maker of EVs, solar panels and batteries said on Sunday it sold a record 466,140 vehicles worldwide from April to June, nearly double the 254,695 sold during the same period a year earlier. Most of the sales were of Tesla’s popular Model 3 and Model Y versions.
But the price cuts, both for special orders and existing inventory, have raised questions from analysts, who expect the cuts to hurt Tesla’s profit margin when it announces second-quarter earnings on July 19.
Tesla’s sales beat Wall Street’s expectations. Analysts polled by data provider FactSet expect deliveries of 445,000 for the quarter.
The company produced 479,700 vehicles from April to June, about 13,000 more than its sales, indicating that inventories are rising.
Tesla’s sales in the first half of this year have grown to nearly 900,000 vehicles from the second quarter’s sales. The company sold 422,875 vehicles from January to March.
CEO Elon Musk predicts that sales will grow by about 50% per year in the near future. To reach that figure for the full year, the company would have to sell 1.97 million vehicles. Analysts expect Tesla to fall just short, delivering 1.82 million vehicles this year.
Tesla cut US prices at least four times during the quarter for vehicles ordered by customers. Large price declines in store inventory emerged at the end of the quarter in mid-June. The company cut the prices of some Model 3 cars by more than $3,000. The Model X SUV received a price cut of more than $10,000, and the company offered three years of free charging for the S and X. The Model S sedan saw a reduction of approximately $7,500.
Prices on inventory of Tesla’s top seller Model Y small-SUV dropped to as low as $1,570 in late June under pressure to move vehicles.
But sales were almost certainly boosted by a $7,500 US government tax credit from the Inflation Reduction Act, which was available on nearly all Tesla models during the second quarter.
Wedbush analyst Dan Ives said the price cuts have boosted sales, especially in China, but at the cost of lower profit margins. He expects Tesla’s margin to bottom out during the next two quarters and return to normal next year.
“We’ll likely see margins take a hit from the price cuts,” said Morningstar analyst Seth Goldstein.
Tesla’s automotive gross profit margin (excluding regulatory credit revenue), the company’s gross profit compared to revenue, was as high as 30% at the beginning of last year. But as interest rates rose, Tesla began cutting prices last year, and margins fell to 19% in the first quarter. According to FactSet, analysts expect 16.9% from April to June.
Ives said Tesla’s US inventory is starting to rise. “It’s going to be a little bit higher in the second half of the year,” he said.
Delivery, he said, is not the whole story of Tesla. General Motors, Ford, Rivian and Volvo announced they would join Tesla’s charging network and begin using its plugs, earning Tesla millions in charging revenue.
Ives said, “I do believe that investors are starting to appreciate the sum of the parts story.”
Tesla shares have more than doubled in value this year, mainly on news that General Motors and Ford are joining the company’s charging networks. Tesla shares closed Friday at $261.77.
Goldstein expects Tesla to ramp up production at new factories in Austin, Texas, and Germany, which will further reduce the company’s fixed costs. “I think we can bottom out in the first half of this year and then from there the margins will recover a bit,” he said.
(This story has not been edited by News18 staff and is published from a syndicated news agency feed – associated Press,