Tesla Motors, the electric car giant, has just announced its first-quarter fiscal 2023 earnings. Despite the company’s total revenue rising by 24% to US$23.329 billion, its gross margin missed market expectations. Gearmusk’s take a closer look at Tesla’s Q1 2023 earnings and what they mean for the company’s future.
Tesla’s Q1 2023 Earnings Report: The Numbers
According to the earnings report, Tesla’s net profit for the first quarter was US$2.539 billion, down from US$3.28 billion in the same period last year. The net profit attributable to common shareholders was also down by 24% YoY to US$2.513 billion. Tesla’s gross margin was 19.3%, missing the 22.4% expected by 14 analysts. The company reported a record $14.38 billion in inventories in the first quarter, up from $669 million a year earlier.
Why Tesla’s Gross Margin Missed Expectations
Tesla’s gross margin miss is due to the double pressure of slumping demand and intensifying competition caused by the economic downturn. To stimulate sales, Tesla had to cut prices several times, which led to sacrificing its industry-leading profit margins. Tesla CEO Elon Musk believes that selling more cars at a lower profit margin and reaping the profit later is a better strategy until the self-driving technology is fully developed. Despite the uncertain economic outlook, Tesla’s orders are still over capacity.
Tesla’s Future Plans
Tesla is too reliant on its Model 3 and Model Y for growth, and investors are eager to see new product launches. Musk wants to bring down the cost of batteries to fulfill his promise to build a $25,000 car, and fans have been eager for Tesla to update its aging models. In particular, they need a full-size SUV to replace the Model X, and a smaller, cheaper Model 3 to drive sales. Musk said in January that Tesla expects to begin production of the Cybertruck this summer, but that mass production won’t happen until next year. Tesla reiterates it expects to deliver around 1.8 million vehicles this year.
As always, investors and fans will be eagerly watching to see what the company does next.