Tesla with a huge profit drop – that’s why

Sales of the electric car manufacturer grew by 24 percent to $ 23.3 billion. Analysts had expected a little more. The stock fell nearly 4 percent in aftermarket trading. Since the beginning of the year, the price had risen by almost 50 percent.

Tesla delivered 422,875 electric cars in the first quarter. The company equaled its previous record, but fell short of expectations. Musk boosted sales with significant discounts and there have been several rounds of price cuts this year. Profitability suffers as a result – Tesla’s operating profit margin fell from 16.0 to 11.4 percent compared to the previous quarter. A year ago that was still 19.2 percent.

Tesla is still way ahead in the industry. By comparison, the margins of Ford and General Motors were recently five and seven percent. Musk justifies the lower prices by wanting to make e-cars affordable to the masses. No shortage of demand.

However, Tesla produced about 18,000 more vehicles in the past quarter than the company shipped. “Tesla is going through a difficult phase. Stocks are running out,” said auto expert Gene Munster of investment firm Deepwater Asset Management. Analysts see Musk’s aggressive pricing as a response to increasing competition in the electric car industry, which is moving from a niche to a mass market.

In the meantime – not least due to regulatory pressure – almost all established car manufacturers have entered the competition with high investments. To stay on track for growth and defend its market leadership, Tesla has little choice but to help with buying incentives.

However, according to its own statements, the company believes that it will maintain one of the highest profit margins in the auto industry in the future despite the price reductions. Tesla also maintains its ambitious goal of expanding production at 50 percent annual growth rates and sees itself on track to deliver approximately 1.8 million cars this year. (sda/afp)