Tesla’s discounts see margin drop

Tesla’s Q2 2023 gross profit margin dropped but sales and profit still exceeded most expectations.

The EV, battery storage and solar company cut prices and increased discounts and other incentives, which put pressure on its automotive gross margin.

Tesla says it’s focusing on reducing costs and on new product development, adding challenges due to “uncertain times” are continuing.

Automotive gross margin, excluding regulatory credits, fell to 18.1% in the second quarter from 19% in the first quarter, according to Reuters‘ calculation, the news agency adding it was 26% a year ago.

Lower raw material costs and US government tax credits helped lower costs per vehicle, Tesla adds.

Tesla reported an overall gross margin of 18.2% for the April-June 2023 period – the lowest in 16 quarters – compared with 19.3% for the first quarter, Reuters explains.

About 1.8 million vehicles are still expected to be delivered this year, says Tesla, which posted record EV deliveries in Q2.

Tesla earned 91 cents per share, while analysts had expected 82 cents profit per share, Reuters reports, the company’s share price more than doubling this year.

Q2 revenue (April-June) is reported at US$24.93 billion (47% increase), beating estimates of US$24.47 billion.

Tesla’s automotive revenue rose 46% year-over-year to US$21.27 billion, about a 6.5% increase.

Net income (GAAP) was $2.70 billion, a 20% rise on last year, while operating income dropped 3% from Q2 in 2022 at US$2.40 billion.

Meanwhile, Tesla has been reportedby EVs and Beyond as having the Cybertruck and other EVs at the Southern Hemisphere Proving Grounds near Queenstown.