It is inevitable for Tesla to cut prices to seize the market. Article | Juny Source | Silicon Star People
On Monday, under the attention of the global audience, the SpaceX starship that Musk was going to fight on Mars was canceled ten seconds before ignition. The second launch was tentatively scheduled for Thursday.
It is unknown whether the "flying star" will be able to successfully soar into the sky tomorrow, but today, the "ground running" Tesla's financial report has been blown up first.
The first quarter financial report shows that Tesla's brilliant performance since the epidemic has suffered a failure in this quarter, with its net income and income both falling by more than 20% over the same period last year. In addition, the financial report also revealed such signals as weak sales and cash flow drying up, which caused the stock price of Tesla to drop sharply after hours. Just before this financial report, Tesla conducted a new round of price reduction in the United States, which has made the overall price reduction of Tesla's models more than 20% since this year.
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The consequences of Tesla's successive price cuts this year are evident in the financial data of this quarter.
In the first quarter of this year, Tesla achieved revenue of US $23.33 billion, basically in line with the market's expectation of US $23.35 billion, with a year-on-year growth of 24%. At the same time, in the first quarter of this year, Tesla produced more than 440000 vehicles and delivered more than 422000 vehicles, with a year-on-year growth of 36%. The scale of production and sales both hit a new high in the company's history. It can be seen that the price reduction strategy has indeed effectively stimulated the market, allowing Tesla to maintain a steady growth in revenue in the cycle of inflation and high interest rates.
However, the price reduction will inevitably bring about a negative impact - a decline in profits. Although the revenue and production and sales volume increased significantly, Tesla's net income in this quarter was only 2.51 billion US dollars, a decrease of 24% over the same period last year. Earnings per share under the general accounting standards was 73 cents, a decrease of 23% over the same period last year, which was the first time since the third quarter of 2019 that EPS fell year-on-year.
Tesla's profits and earnings fell significantly in this quarter, the picture is from Twitter
On the basis of the low profit margin in the fourth quarter of last year, Tesla's profit margin continued to decline comprehensively in this quarter. In the first quarter, the gross profit rate of Tesla's auto business was 21.1%, continuing to decline from the 24 month low of 25.9% in the fourth quarter of last year, while the gross profit rate in the same period of last year was 32.9%. The operating profit margin was 11.4%, down nearly 780 basis points year on year, 16% in the fourth quarter of last year, and the overall gross profit margin in the first quarter was 19.3%, down nearly 980 basis points year on year, 23.8% in the fourth quarter of last year, and 29.1% in the first quarter of last year, lower than the expected 21.2%.
In addition to the price reduction, Tesla said that the increase in the cost of raw materials, commodities, logistics and warranty, as well as the decrease in the sales revenue of carbon emission credits, also led to the decline in profits.
From the perspective of sub businesses, the auto business revenue as Tesla's core business reached 19.96 billion dollars in this quarter, up 18% year on year. Energy revenue continued to soar, recording $1.53 billion, up 148% year on year. Among them, the deployment of Tesla's energy storage system increased by 360% to 3.9 GWh, including the household backup battery of Powerwall and the Megapack system of utility scale.
Composition of Tesla's revenue in the first quarter of 2023, the picture is CNBC
In addition to the sharp drop in profit margin, there are some potential pitfalls in Tesla's financial report this time.
Previously, Musk said that Tesla's orders grew rapidly, almost twice the production speed, after the sharp price reduction at the beginning of the year. Therefore, even if the profit margin drops, if Tesla's demand continues to remain high, the total profit will still grow steadily.
The problem is that Tesla's sales may not be as strong as Musk described. Although Tesla's production and sales reached a new high in this quarter, from the perspective of month on month growth, Tesla's delivery in the first quarter only increased by 4% compared with the previous quarter, while the month on month growth rate in the fourth quarter of last year was as high as 17.8%. At the same time, Tesla's output in the first quarter was actually nearly 18000 vehicles higher than the delivery volume. For Model S and X models, only 10695 vehicles were delivered in this quarter, which is the lowest level since the third quarter of 2021. Its output is almost twice the sales volume.
Therefore, some analysts believe that if Tesla does not further reduce the price, the oversupply of Tesla vehicles will become more and more obvious, and it will not be able to maintain sustainable growth in the future.
In addition, Tesla's free cash flow is shrinking rapidly. The financial report shows that Tesla's operating cash flow in the first quarter was $2.5 billion, far less than the market's expected $3.24 billion. The free cash flow after deducting capital expenditure was only $440 million, down 80% year on year. In the fourth quarter of last year, its free cash flow was $1.42 billion. This time, if the revenue of $521 million generated by Tesla's sales of carbon emission credits is not included, Tesla's free cash flow in this quarter has become negative.
Although the decline of Tesla's profits this time was basically within the market's expectation, due to these potential risks and the uncertain market prospect, after the release of the financial report, Tesla's share price once again plummeted more than 6% on the basis of a 2% intraday drop.
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Just before the release of this financial report, many people found that Tesla had quietly lowered the price in the US market yesterday.
This time, the decrease of Model Y AWD, Model Y Long Range and Model Y Performance reached $3000, and the prices after the reduction were $46990, $49990 and $53990 respectively. For Model 3, the price has dropped by $2000, and the price has fallen below $40000 to $39990.
It is worth noting that this is not only Tesla's second price cut this month, but also the sixth price cut in four months this year. After a series of price reductions, the price of Model 3 is now 11% lower than that at the beginning of the year, while Model Y is more than 20% lower than that at the beginning of the year. In response to weak demand, rising interest rates and increasingly fierce competition for market share of electric vehicles, Tesla has lowered prices to varying degrees in China, Israel and Europe, except for the U.S. market.
At present, the basic configuration price of Tesla's Model 3 and Model Y has recovered to the level of the first quarter of 2021, and Tesla's operating profit margin of 11.8% in the first quarter is lower than 12.1% at that time. But even so, Tesla's gross profit margin is still more than double that of traditional car companies.
Of course, Tesla's financial report also revealed some positive news. For example, the high-profile Cybertruck does not seem to skip tickets. Tesla said that its production plan is still progressing steadily and is expected to officially meet the market in the second half of this year. In addition, the production of Tesla's factory has entered a stable high production cycle. The Berlin factory has achieved the progress of producing 5000 Model Y vehicles a week this quarter. The Shanghai factory has successfully operated at full load for several months, and the new Mexican super factory is also under construction.
It is worth noting that at the financial report conference, Musk said again that Tesla will achieve fully automatic driving this year. Of course, this commitment has been made for several years. However, Musk still did not disclose any information about the new model of Tesla that everyone was waiting for, which also led to the further decline of Tesla's share price after the financial report meeting.
Judging from the current market situation, it may be difficult for Tesla's auto business to achieve its goal of seizing the market and maintaining a gross profit rate of 20% by reducing prices. After this financial report, many institutions also lowered their expectations of Tesla's annual earnings and adjusted it to the sell rating.
Next, besides caring about how the starship can soar into the sky, Musk may also need to spend some energy thinking about how to make Tesla break through obstacles and run faster.
(Statement: This article only represents the author's view, not Sina.com's position.)
