Tesla rebates expected to fuel quarterly revenue growth and hit profits

By Akash Sriram

(Reuters) – Tesla’s strategy to boost sales through price cuts likely fueled its strongest revenue growth in five quarters while dragging margins to a three-year low in the April-June period .

The Elon Musk-led electric vehicle maker has since late last year launched a price war to fuel demand and stifle competition from traditional automakers such as Ford Motor and Chinese rivals including BYD.

Tesla’s earnings on Wednesday are expected to show its gross profit margin narrowed to 18.9% in the second quarter, according to 19 analysts polled by Visible Alpha. This is down from 20.2% in the previous quarter and 25.9% a year earlier.

The only reason Tesla delivered slightly more cars in the second quarter than in the previous three months was because it slashed sharply at the expense of its margins, said Vitaly Golomb, a banker at investment that focuses on mobility.

“Clearly they are largely an automotive company with the same supply chain and demand pressures as other manufacturers. They even have a growing inventory of their Model 3s and Model Ys of threes and sixes. years and really seem to have reached a certain saturation point on demand.”

The world’s most valuable automaker produced 13,560 more vehicles in the quarter than it delivered to customers. While that gap has narrowed from first-quarter numbers, it’s a worrying trend for the company, which predicted in October that it would sell every car it makes for the foreseeable future.

The lack of new models has also made it harder for Tesla to compete against rivals in China, where an uneven economic recovery and fresher, glitzier offerings from local players have weighed on demand.

Tesla saw record deliveries of its China-made cars in the quarter, but its share of the country’s pure-electric and plug-in hybrid market fell to 8.8% from 10.5% in the first three months of 2023, according to a Reuters calculation based on numbers. of a body of the Chinese automobile industry.

“Tesla’s market share in the electric vehicle segment is likely to decline over time,” said Morningstar analyst Seth Goldstein. “However, I think the most appropriate metric to look at is Tesla’s total automotive market share, which continues to grow as they continue to increase deliveries.”

ADVANCE LOADING

As electric vehicle sales slow, Tesla has moved aggressively to capture a bigger share of the U.S. charging market in a bid to diversify revenue.

It has partnered with companies such as Ford Motor and General Motors to use its North American Charging Standard (NACS), a move that has seen its market value more than double this year to $880 billion. of dollars.

Following these partnerships, several charging companies have declared that they will adopt the Tesla standard.

While this will contribute little to second-quarter revenue, which is expected to rise 45.2% to $24.59 billion, according to Refinitiv, analysts predict it will significantly boost the company’s revenue. in the future.

Piper Sandler estimates that Tesla’s revenue from its charging network will reach $9.65 billion in 2032, with more than half of sales coming from electric vehicles made by other automakers using its network.

(Reporting by Akash Sriram in Bengaluru; Editing by Aditya Soni and Vinay Dwivedi)

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