Tesla Sales Surge, But at What Cost?
Price cuts work — but only up to a point. Which is about all one can glean from Tesla Inc.'s latest quarterly sales numbers, announced Sunday. The struggle between growth and margins, which defined the first half of 2023, has yet to be resolved.
Having delivered about 466,000 vehicles, Tesla beat the consensus estimate by 4%. Deliveries so far this year are up 58% compared with the same period in 2022 and, at the current run rate, look on track to meet Tesla's guidance of about 1.8 million this year (though more would be needed to hit the two million upside case Chief Executive Elon Musk has mentioned). For Tesla's never-small fan club, this should be enough to support the stock on a thinly traded pre-July 4 Monday.
What we won't know until July 19, however, is whether the goodies Tesla offered to entice buyers, including price cuts, inflicted more damage on profits. When Tesla reported first-quarter results back in April, the ding to gross margins from a very public price war unnerved investors enough to wipe $56 billion, or roughly 10%, from its market cap the next day. While Tesla's margins fell from a relatively high level, the notion that Tesla might suffer the oldest of Detroit's afflictions — taking a hit on profits to move product — was hard to reconcile with the company's more cutting-edge narratives.
On that front, there is one unsettling element from Sunday's numbers: Tesla is still producing more vehicles than it is selling. While the gap is narrowing, this marks the fifth quarter in a row of excess production, for a cumulative total of just over 91,000 undelivered vehicles. At a notional cost of about $38,000 each — the implied average production cost in the first quarter — that's almost $3.5 billion of
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