Tesla Price Cut Hits Back As The Company Witnesses Negative Economic Outcomes

Tesla Price

Tesla is getting paid by its own coins and that too in a poor manner! As a matter of fact, we know that Tesla is a multinational automotive and clean energy company with Elon Musk as its CEO. We know Tesla as the manufacturer of Electronic Vehicles. In fact, at one point in time, they were the forerunners in making EVs. However, now the competition is strengthening with various other renowned brands coming up with EVs.

One of the most prominent competitors for Tesla is Ford. Ford’s leading EV in recent times is the Mustang Mach-E. To provide strong competition to Tesla and to see their sales grow up the ladder, they cut down the price of Mustang. Together with this, some other brands like General Motors, have stepped into the world of EVs and have promised to provide less expensive versions of these electronic vehicles. Therefore, faced with these challenges, Tesla also announced a price cut for its EVs. However, this plan seems to affect them adversely. Therefore, if you wish to know more in this regard, then this article is the perfect stop for you. 

Tesla Suffers From Price Cut

A price cut is a great option to grow the sales of a company. However, Tesla has taken this plan very seriously as it has cut down the prices of its EVs four times in the last quarter. In addition, they have also decreased the price of their vehicles twice this month so far. As a result of this rapid price cut, their earning has nose-dived to $2.9 billion this year. This figure is a 22% decline from that of the previous year for the company. 

In addition, compared to the third and fourth quarters of last year, the profit margins are also fast declining for Tesla. Though the company witnessed a record delivery number in the fourth quarter, its revenue has declined by $1.3 billion. The gross profit margin according to the company is 19.3%. This is again the lowest since the end of 2020, during the pandemic times. 

Tesla’s most significant area of income is the automotive profit margin. Here too, the company is seeing figures below the 19% margin. We know that the valuation of Tesla is humongous. That is mostly due to its strong growth targets and profit margins. However, now these areas are suffering the most.

Tesla Suffers From Price Cut

What Tesla Officials Said

Zachary Kirkhorn, the CFO of Tesla, failed to provide guidelines about the future of the company’s profit margins. Kirkhorn stated that the prevailing conditions are not suitable to make any projections due to ‘a lot of macro uncertainty.’ The CFO added that there are both ‘headwinds and tailwinds’ for the company at the moment. 

Attending a call with the investors, the CEO of Tesla, Elon Musk stated that there are some headwinds for the company in the broader economic conditions. He reiterated the words of the CFO regarding the macro uncertainty prevailing in the present market scenario. He stated that the demand for cars is coming down due to a hike in interest rates by the Federal Reserve. This factor is also increasing the price of cars. 

Pointing to the growing economic uncertainty, Musk added that during these situations, people generally stay away from bigger investments like buying cars. He also defended the price cut by pointing out further that their operating margin is still one of the most respectable ones in the business. He also advocated for larger volume sales than focusing on larger margins. Therefore, now let us see where things boil down in the final judgement. 

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