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Elon Musk shows willingness to sacrifice Tesla’s margins for market share

Elon Musk aims to make more money later when Tesla’s cars become fully self-driving and can earn extra money by operating as “robo-taxis” , has signaled a willingness to sacrifice Tesla’s profits in the short term by aggressively pushing for market share.

As the U.S. electric car maker reports that this year’s price cuts have pushed its first-quarter profit margins below already-cut estimates, Tesla’s chief executive asks why shareholders should accept lower earnings I made an unconventional justification for

His comments on Wednesday’s earnings call pushed Tesla’s share price lower in aftermarket trading, adding another 6% to a 10% drop that has been suffering since the start of the month on concerns about falling demand.

series price cut Since the beginning of the year, Tesla’s gross margin has fallen to 19.3% in the first quarter. That’s lower than what the company offered when it started cutting prices, and 10% below the record profit margin reported a year ago.

“This is a great opportunity to extend our lead even further, and we will continue to invest in growth as quickly as possible,” Musk said of the price cut. He added that Tesla has a “unique strategic advantage” in being able to make money from fully automated cars.

“We are the only ones making cars that can technically be sold for zero profit today and can drive huge profits in the future through self-driving,” he said.

The company has failed to hit the recurring goals Musk has set for full self-driving cars, and is the most vague about how Tesla owners can make money by renting out their personal cars as driverless taxis. It only gives a brief overview.

Wall Street has been optimistic about Tesla’s price cuts so far, and the group’s willingness to sacrifice some of its industry-leading margins to keep sales is what other electric vehicles will do. They wanted to increase their dominance over manufacturers. The stock is still up 67% since the beginning of 2023, but Musk is clearly happy that profit margins will fall further, along with indications that price cuts have only slightly boosted sales this year. .

Adjusted earnings per share declined 21% in the first quarter, but revenue increased 24% year-over-year as Tesla shifted to focus on market share over profits. For most metrics, including cash flow margins and operating margins, Tesla’s profitability has fallen to his lowest levels in two years, but gross margins are back at the level he was three years ago.

Breaking with recent practice, Tesla did not disclose gross margins from its automotive business.

Despite lower earnings, Tesla delivered an adjusted profit of 85 cents on sales of $23.3 billion, lowering Wall Street earnings forecasts. Based on formal accounting principles, revenue decreased to 73 cents from 95 cents a year ago.

Tesla has announced price cuts of up to 20% on some versions of its biggest sellers, the Model 3 and Model Y.However, the number of vehicles delivered The quarter was up just 4% from the final quarter of 2022.

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Elon Musk aims to make more money later when Tesla’s cars become fully self-driving and can earn extra money by operating as “robo-taxis” , has signaled a willingness to sacrifice Tesla’s profits in the short term by aggressively pushing for market share.As the U.S. electric car maker reports that this year’s price cuts have pushed its first-quarter profit margins below already-cut estimates, Tesla’s chief executive asks why shareholders should accept lower earnings I made an unconventional justification for His comments on Wednesday’s earnings call pushed Tesla’s share price lower in aftermarket trading, adding another 6% to a 10% drop that has been suffering since the start of the month on concerns about falling demand.series price cut Since the beginning of the year, Tesla’s gross margin has fallen to 19.3% in the first quarter. That’s lower than what the company offered when it started cutting prices, and 10% below the record profit margin reported a year ago.”This is a great opportunity to extend our lead even further, and we will continue to invest in growth as quickly as possible,” Musk said of the price cut. He added that Tesla has a “unique strategic advantage” in being able to make money from fully automated cars. “We are the only ones making cars that can technically be sold for zero profit today and can drive huge profits in the future through self-driving,” he said. The company has failed to hit the recurring goals Musk has set for full self-driving cars, and is the most vague about how Tesla owners can make money by renting out their personal cars as driverless taxis. It only gives a brief overview.Wall Street has been optimistic about Tesla’s price cuts so far, and the group’s willingness to sacrifice some of its industry-leading margins to keep sales is what other electric vehicles will do. They wanted to increase their dominance over manufacturers. The stock is still up 67% since the beginning of 2023, but Musk is clearly happy that profit margins will fall further, along with indications that price cuts have only slightly boosted sales this year. . Adjusted earnings per share declined 21% in the first quarter, but revenue increased 24% year-over-year as Tesla shifted to focus on market share over profits. For most metrics, including cash flow margins and operating margins, Tesla’s profitability has fallen to his lowest levels in two years, but gross margins are back at the level he was three years ago.

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Breaking with recent practice, Tesla did not disclose gross margins from its automotive business.Despite lower earnings, Tesla delivered an adjusted profit of 85 cents on sales of $23.3 billion, lowering Wall Street earnings forecasts. Based on formal accounting principles, revenue decreased to 73 cents from 95 cents a year ago.Tesla has announced price cuts of up to 20% on some versions of its biggest sellers, the Model 3 and Model Y.However, the number of vehicles delivered The quarter was up just 4% from the final quarter of 2022.
https://www.ft.com/content/94f6a47c-42ad-4749-8e31-8d568270cf57 Elon Musk shows willingness to sacrifice Tesla’s margins for market share

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