Tesla's operating income in the first quarter of 2023 fell 24 percent to $2.7 billion even though the EV maker's total revenue grew 24 percent year-on-year.
Tesla's first quarter revenue was $23.33 billion, which was slightly below the Wall Street estimate of $23.35 billion. The revenue numbers were lower than the $24.32 billion Tesla reported in the fourth quarter of the last year.
Delivers 422,875 Vehicles in Q1
Tesla's adjusted net income came in at $2.9 billion, which was also less than the $3.03 billion estimated by the analysts. Net income was $2.51 billion, which was down 24 percent from last year.
Tesla delivered 422,875 vehicles in the first quarter.
These misses led to a nearly 4 percent fall in the share price of Tesla in after hours trading. "Although we implemented price reductions on many vehicle models across regions in the first quarter, our operating margins reduced at a manageable rate. We expect ongoing cost reduction of our vehicles, including improved production efficiency at our newest factories and lower logistics costs, and remain focused on operating leverage as we scale," Tesla said in a statement.
In an earnings call with analysts, Elon Musk said the company will start delivering the Cybertruck in the third quarter of 2023. "It takes time to get the manufacturing line going, and this is really a very radical product. It's not made in the way that other cars are made ... One thing I am confident of saying is that it's an incredible product. It's a Hall of Famer," Musk said.
Despite the slight revenue and profit miss in the first quarter, Tesla says 2023 will roll in good news. The leading EV maker said global production will hit 1.8 million vehicles, and that its long-term delivery growth will stay above 50 percent.
One of the reasons why profits stayed muted was the aggressive price cuts Tesla undertook in recent months. Tesla rolled out several price cuts in the US, Asia, and some European markets in the first quarter. Even this week, Tesla cut the prices of its Model 3 and Model Y EVs, with some variants coming in at below $40,000.
Analysts have said the aggressive price cuts will result in lower profitability for not only Tesla but other EV makers as well.
"We have been cautious about the profit impact of Tesla's price cuts, writing that the lower prices are negative overall for Tesla, less negative for traditional automakers such as GM and Ford (given they are now likely to lose even more money in the interim on EVs, although they have other profit centers to offset such losses), and most negative of all for pure-play battery electric automakers competing with Tesla (such as Rivian), as they, too, are likely to lose more money on EVs although do not have profits elsewhere to offset these losses," said Ryan Brinkman of JPMorgan, according to Yahoo Finance.
The price cuts, however, have helped Tesla raise its car sales. Tesla's first quarter delivery and production numbers beat estimates, with the electric car maker reporting 422,875 vehicle deliveries globally in the first three months of the year. The stronger than expected numbers show that the price cuts Tesla announced last year have been effective in driving up sales. The EV maker's first-quarter vehicle sales numbers show that sales surged 36 percent following the company's decision early this year to cut prices to stimulate demand.