Tesla Q1 earnings falls 24% as EV value cuts squeeze income

Tesla reported Wednesday web earnings of $2.51 billion within the first quarter, a 24% drop from the identical interval final yr as the corporate’s EV price-cutting technique reduce into income.

Tesla has repeatedly decreased the value of its 4 EVs — the Mannequin S, Mannequin X, Mannequin Y and Mannequin 3 — in the US in addition to Europe and China. That technique has helped enhance gross sales with income within the first quarter reaching $23.3 billion, a 24% pop from the identical interval final yr.

Nevertheless it has additionally squeezed the automaker’s historically sturdy automotive gross margins. On the identical time, Tesla’s working bills have remained largely flat (falling simply 1% from Q1 in 2022) and its capital expenditures have elevated. The corporate reported that it spent $2 billion in capital expenditures within the first quarter, a 17% enhance from the identical quarter final yr.

In the meantime, its working margin — one measure of profitability and an space the place Tesla has been an business chief — fell from 19.2% within the first quarter of 2022 to 11.4 on this interval.

Tesla shares fell 4% in after-hours buying and selling.

Tesla continues to generate most of its income from the sale of EVs, though there may be some progress in different areas like vitality storage and photo voltaic.

Within the first quarter, Tesla’s automotive income — a determine that features $521 million in zero emissions tax credit — hit practically $19.9 billion, an 18% enhance YoY. That regulatory credit quantity is up from the final three quarters, however down from Q1 2022.

Tesla closed out the quarter with free money move of $441 million, which is down 80% from the identical interval final yr.

Vitality era and storage income

Tesla CEO Elon Musk revealed the corporate’s Grasp Plan Half 3 on the firm’s annual Investor Day in March 2023. A lot of the plan was centered on how Tesla would drive the worldwide shift away from fossil fuels and in the direction of renewable vitality, and the automaker’s vitality storage and era enterprise is an enormous a part of that plan.

Within the first quarter, income from that facet of the enterprise hit a document $1.5 billion, a rise of 148% from the identical quarter final yr. Tesla stated it’s quickly rising its vitality storage manufacturing capability at its Megafactory in Lathrop, California. The corporate additionally just lately introduced a brand new Megafactory in Shanghai that can have 40 GWh of capability. Development is scheduled for later this yr.

Tesla’s deployments for vitality storage additionally elevated considerably YoY, up 360% to three.9 GWh, which the corporate says is the very best degree of deployments because of the Megafactory ramp. Within the photo voltaic division, deployments elevated 40% from Q1 2022, however declined quarter-over-quarter. Tesla says this is because of risky climate, in addition to provide chain challenges.

From {hardware} to software program

Tesla repeatedly famous that it plans to extend income from software-related providers.

“Whereas we proceed to execute on improvements to scale back the price of manufacturing and operations, over time, we anticipate our hardware-related income to be accompanied with an acceleration of software-related income,” the corporate stated in its Q1 letter to shareholders. ” We proceed to imagine that our working margin will stay among the many highest within the business.”

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