Tesla exceeded Wall Street expectations with revenue for the quarter up to $24.97 billion in its latest report.
On Tesla’s earnings call, it was announced that revenue rose 46% year-on-year in its core automotive business. However, its latest success came at the cost of discounts and incentives which eroded profit margins.
With the U.S. economy cooling, Musk has been looking to drive higher demand for electric vehicles while taking a hit on margins, which were down 9.6%, the lowest recorded for 5 quarters. Despite this, Tesla has proven to be resilient and continues to outperform expectations considering the headwinds in the economic overview.
Additional factors including the ramp up of battery cell production also weighed on profitability in the short-term, part of a strategy to improve its product lines and offerings. Research and development costs also rose as the company is seeking to take a lead in AI development. This was evident in its decision to start the project of its training computers, referred to as “Dojo” over the past several months.
Tesla produced more than 460,000 Model 3s and Model Ys, extending production by over 4000 vehicles in the latest quarter.
Elon Musk however warned that Tesla could continue to reduce prices due to “turbulent times” in the world economy.
In after-hours trading in New York following the earnings call, shares fell over 4% as Musk’s latest admission of further price reductions suggested reduced profitability for Tesla in the coming months.
With Tesla fighting off competition from other manufacturers that are in the process of introducing new EV vehicles, it may prove to be more difficult for the company to maintain its growth of vehicle deliveries in the coming quarters.
However, early signs of falling inflation in several G7 countries including the U.S. and the U.K. could improve consumer sentiment toward the end of the year, providing a sales boost to Tesla.