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Price Cuts Tamp Down Tesla Third Quarter Results

by | October 19, 2023

The impact of Tesla’s price cuts hit home in the third quarter as its earnings fell on a year-over-year basis. Perhaps more importantly, more price cuts are expected to come in the fourth quarter at the company pushes to meet its goal of delivering 1.8 million vehicles globally. More cuts means a tough final quarter — fiscally anyway.

Tesla Giga Austin pre-production Oct. 2021

Tesla’s delivery numbers fell during the third quarter of the year.

Tesla’s third quarter earnings results were down with much of the blame coming from the ongoing price cuts the EV maker implemented to move more metal.

CEO Elon Musk noted during the company’s earnings call, higher interest rates could impact product demand not just for Tesla vehicles, but for all automakers.

“People hesitate to buy a new car if there’s uncertainty in the economy,” Musk said during the company’s third quarter earnings call Thursday evening. He noted if Americans are worried about the economy, it’s not a great time to ramp up production at the company’s plants in Texas and Mexico.

Tesla Fremont employee on line

Tesla saw its net income fall 44% to $1.9 billion due the price cuts aimed to drive up sales.

“I don’t want to be going into top speed into uncertainty,” he said.

The numbers

The company reported net income of $1.9 billion on revenue of 23.4 billion. The income number is down 44% while revenue was up 9%. The company’s operating margin was 7.6%, comparable to mainstream automakers like General Motors and Stellantis. The margin is down 964 basis points compared to the year-ago period.

The numbers could have been worse. Although the company did cut prices during the quarter, it also reduced the cost of goods sold per vehicle to $37,500.

“Our main objectives remained unchanged in Q3-2023: reducing cost per vehicle, free cash flow generation while maximizing delivery volumes and continued investment in AI and other growth projects,” the company said in a report.

2021 Tesla Model Y blue

Model Y and Model 3 accounted for more than 90% of all vehicles delivered globally in the third quarter.

“While production cost at our new factories remained higher than our established factories, we have implemented necessary upgrades in Q3 to enable further unit cost reductions. We continue to believe that an industry leader needs to be a cost leader.”

Despite lower profits, officials said the company will invest more in research and development and spend more on items focused on the company’s future growth. The company’s free cash flow for the first nine months reach $2.3 billion.

The company delivered 435,059 vehicles during the quarter, an increase of 27%. Production for the timeframe was 430,488 units, which was also a rise of 18%. The vast majority of those vehicles were Model 3 and Model Y. In fact, Model S and Model X deliveries and production were down 14% and 31% respectively.


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