February 25, 2024
Tesla’s profits in the third quarter were lower than expected by Wall Street, as the automaker reduced prices to maintain its dominant position in the electric vehicle market.
Elon Musk is the CEO of Tesla. He also shattered hopes that a new pickup truck model, the Cybertruck, would revive earnings quickly. Musk warned that it would take the pickup truck at least 18 months to become profitable once it went on sale in November.Tesla reported a $1.9 billion net profit from July to September. This is a 44 percent decrease from the $3.3 million it made during the same period last year.

Musk said he was trying to “temper expectations.” It warned investors and financial analysts on Wednesday that it would be “extremely difficult” to reach volume production of Cybertruck and make the Cybertruck cash flow positive.

“The amount of blood, sweat, and tears required to accomplish this is staggering.”

In the United States, the company has cut car prices by 25 percent over the past year. The priority is now sales and not profit. Tesla’s Model Y, its best-selling sport-utility car, is currently priced at $44,000 before government incentives. This is roughly the same price as the Toyota RAV4 Prime Plug-in Hybrid, which also has an electric motor.

Electric Vehicles are on the Rise

  • Biden’s Climate Law: President Biden’s signature climate legislation has stimulated an explosion of investment in the production of electric vehicles throughout the United States. The bill hasn’t yet had the same effect on E.V. sales.
  • Preventing blackouts: When electric vehicles are not in use, they can help utilities meet demand by storing solar and wind power and releasing them when needed. Electric buses are especially effective.
  • Chinese E.V.: A threat from China. Companies are gaining ground, partially through government assistance but also due to rapid technological advancements. They have good reason to be concerned about their competitors.
  • Toyota Struggles: Toyota is the world’s biggest carmaker. It is slow in selling all-electric cars. This has alienated some customers and hurt sales.

Tesla stated in a press release that “we continue to believe an industry leader must be a leader on cost.”

According to Kelley’s Blue Book, Tesla’s market share in the United States for electric vehicles fell to 50% in the third quarter. It was 60% in the first. BMW, Mercedes-Benz, Hyundai, General Motors, and other automakers are introducing electric vehicles rapidly, which is eroding Tesla’s dominance.

Tesla faces stiffer competition from local automakers in China and Europe – two major markets for electric cars – as well.

Analysts expected a drop in profits after Tesla announced earlier this month sales had fallen in the third quarter due to temporary factory shutdowns for retooling assembly lines in factories in Austin, Texas, and Shanghai. The slump was worse than expected.

Tesla, at least until recently, was more profitable than the established U.S. carmakers. This allowed it to lower prices. Kevin Roberts is the director of CarGurus’ industry insights and analysis. He said that he saw it as a means to protect market share by sacrificing margin.

It is possible that the company will not be able to continue to cut prices indefinitely. The company’s net profit margin for the third quarter was 8%, which is in line with traditional automakers.

Investors hoped that the cybertruck pickup could revive sales. The company announced Wednesday that deliveries would begin on Nov. 30 – two years late.

Musk admitted that Tesla faced severe difficulties in mass-producing the vehicle with its unusual stainless steel body. The material is resistant to rust, does not require painting, and is more difficult to weld and shape.

Mr. Musk stated, “We dug ourselves a grave with Cybertruck.”

Ford Motor, Rivian, and General Motors reported a lackluster sale of electric pickup trucks following an initial surge in interest from customers, suggesting that this market may not be as large as industry executives and analysts had thought. This week, G.M. Ford announced that it will slow production of the F-150 Lightning and G.M.

Mr. Musk said that the demand for the Cybertruck is “off the charts” and that over one million people have already placed orders. He did note that the higher interest rates had led to increased monthly payments for consumers, which reduced their ability to purchase new cars.

He said, “We need to price it so that people can afford it.”

Tesla would benefit if the United Automobile Workers strikes against Ford, G.M. Stellantis, and Ford expands the strike to other factories. Workers at six plants belonging to the three companies have so far walked out of their jobs. Tesla employees do not belong to any union.

Tesla’s stock, which had fallen nearly 5 percent during regular trading on Tuesday, fell another 3 percent after Mr. Musk’s conference call.

He said, “I don’t say things will be bad, but I think they could be.”

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