Tesla’s electric vehicle (EV) price-cutting strategy has shrunk the first quarter’s net income by 24% to $2.51 billion.
Tesla has repeatedly lowered the prices of its four EVs— Model S, Model X, Model Y, and Model 3—in the US, Europe, and China. That strategy increased first-quarter revenue to $23.3 billion, which amounts to a 24% Year over Year (YoY) increase.
The price-cut strategy also reduced the automaker’s traditionally high automotive gross margins. Tesla’s operating expenses have fallen just 1% from Q1 2022, but its capital expenditures rose 17% to $2 billion in the first quarter.
Furthermore, Tesla’s operating margin — a main indicator of profitability — fell from 19.2% to 11.4% on a YoY basis. In after-hours trading, Tesla shares took a hit of 4%. The company ended the quarter with $441 million in free cash flow, down 80% on a YoY basis.
Tesla still makes most of its money selling EVs. Due to the volatile global economy and the car industry’s inconsistent operational dynamics, the pioneer EV maker is struggling to steady its sail.
