Tesla, Margin Deterioration Due to Price Cuts... Stock Rises on New Model Expectations (Comprehensive)

Both Sales and Net Profit Fall Short of Market Expectations

[Image source=Reuters Yonhap News]

U.S. electric vehicle company Tesla reported disappointing third-quarter results this year, falling short of market expectations. This was due to a significant deterioration in margins following price cuts in its largest markets, the U.S. and China.

On the 18th (local time), Tesla announced in its earnings report that third-quarter revenue reached $23.35 billion (approximately 31.64 trillion KRW), a 9% increase compared to $21.454 billion in the same period last year. However, this was well below the market expectation of $24.1 billion.

Net profit for the same period sharply declined by 44% year-over-year to $1.853 billion (approximately 2.51 trillion KRW). Adjusted earnings per share were 66 cents, also below the market expectation of 73 cents.

The operating margin was 7.6%, down 9.6 percentage points from 17.2% in the same period last year, and the gross profit margin was 17.9%, a decrease of 7.2 percentage points from 25.1% last year.

The company explained that production disruptions due to factory expansions impacted the decline in performance. In particular, both production volume and deliveries fell compared to the previous quarter, leading to a larger drop in profitability. Tesla delivered 435,059 vehicles in the third quarter, a 7% decrease from 466,140 units in the previous quarter.

However, the annual production target of 1.8 million units for this year was maintained. The plan is to drive future production growth through factory expansions. Based on cumulative production through the third quarter, Tesla has achieved about 75% of this year’s target.

In a shareholder letter, Tesla stated, "The cost per vehicle sold in the third quarter decreased to $37,500," adding, "Although production costs at new factories remain higher than at existing ones, we expanded production capacity as needed in the third quarter, achieving further cost reductions."

Since early this year, Tesla has shifted to a volume expansion strategy, resulting in continued profitability declines due to vehicle price cuts. In the largest market, the U.S., the starting price of vehicles has dropped by about one-third compared to early this year. Notably, the price cut for Tesla’s highest-priced model, the 'Model X,' exceeded 30%.

Along with the earnings announcement, Tesla also detailed its new vehicle launch plans. Tesla said, "Trial production of the new 'Cybertruck' has begun at the Gigafactory, and the first deliveries are scheduled for the 30th of next month." The Cybertruck’s production schedule has been delayed multiple times, making it more than two years later than the originally announced launch date of 2021 when Tesla first unveiled the Cybertruck to the media in 2019. Tesla has not released a new vehicle since the 'Model Y' in 2020.

Tesla’s stock, listed on the Nasdaq, closed the regular trading session down 4.78% at 242.68, compared to the previous session. This marks a roughly 33% decline from the March high of last year ($361.53). Following strong buying interest fueled by anticipation of the awaited new vehicle launch, after-hours trading saw a 1.16% increase (as of 6:28 a.m. KST).

This content was produced with the assistance of AI translation services.