Elon Musk reveals the background of his strategy that worries investors
Electric car maker Tesla has cut prices many times this year. In this process, the company’s net income decreased 24 percent compared to the same period of the previous year and decreased to $2.5 billion, while its revenue increased 24 percent to $23.3 billion. .
Tesla’s net profit was $3.3 billion in the same period last year and rose to a record $3.7 billion in the latest quarter.
On the other hand, Tesla generated $18.8 billion in revenue in the first quarter of 2022, and the company’s revenue broke a record with $24.3 billion in the last quarter.
In the first quarter of 2023, Tesla increased its vehicle production by 44% annually, while the number of vehicles it delivered increased by 36%.
PRICES REDUCED 6 TIMES, FOCUS ON SALES
American electric car maker Tesla has cut prices on two electric vehicle models in the US for the sixth time this year, despite concerns about their impact on profit margins.
While Tesla CEO Elon Musk’s price cuts and declining net profits are interpreted as the EV pioneer’s loss of superiority, it is also widely believed to be the pioneer of a change. in the electric vehicle industry.
Elon Musk explained his strategy behind the price cuts in his remarks on the subject last week. Musk said he will prioritize sales growth despite declining profitability.
This stance has angered some investors, who expect the company to continue to substantially increase deliveries while maintaining record profit margins. Investors fear that global sales leadership will be pursued at the expense of profit margins.
THIS STRATEGY HAS CAUSED A FEELINGS BEFORE
Elon Musk’s strategy of increasing sales despite falling profit margins has resulted in some flops before.
The bankruptcy of US auto giant General Motors (GM) in 2009 stemmed from the Motor City’s practice of overproducing cars and then using deep discounts to boost sales.
IT WILL BE A REMEDY IN THE FUTURE
Elon Musk is betting that the race to develop self-driving car technology will shake the foundations of the auto industry, saying current margin losses will be offset by more Tesla vehicles on the road in the future.
Tesla says it could cost about $150 billion to hit its goal of producing 20 million cars a year by 2030, while investors fear Tesla’s price cuts will spark a broader price war that will hurt everyone.
So far, competitors have resisted Tesla’s price-cutting battle. Legacy automakers have largely stopped chasing market share and are focused on profitability.