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Tesla’s profit margins slipped in the latest quarter as a series of price cuts this year weighed on its earnings, according to figures released on Wednesday.
However, profitability still held up better than many analysts on Wall Street had been expecting. Tesla shares have risen 137 per cent since the start of the year, with most of the gains coming in the past two months as Wall Street has applauded its strategy of slashing prices to protect market share in a shaky electric vehicle market.
The company’s gross profit margin from automotive operations, excluding the effect of regulatory credits, dropped to 18.2 per cent in the past three months. That compared to 18.8 per cent in the first quarter of 2023 and 26.2 per cent a year ago.
Analysts had been expecting a steeper decline in the latest period after flagging sales at the start of the year led Tesla to cut prices. The move reinvigorated sales and lifted deliveries in the second quarter more than expected. Even at current depressed levels Tesla’s gross profit margins exceed most traditional carmakers.
Investors have also been looking past the second-quarter results, assuming that they represent the bottom of the trough in profit margins. Tesla has been working to increase the efficiency of its car production and lift volumes from its newer plants in Texas and Germany. It said these efforts had played a big part in limiting the fall in its overall operating margin to 9.6 per cent this quarter, five percentage points lower than a year ago.
Thanks largely to working capital improvements, Tesla also managed to boost its free cash flow for the quarter to $1bn, up from $441mn in the preceding three months.
Adjusted earnings per share for the second quarter reached 91 cents, up from 76 cents in the same quarter last year and above the 82 cents most analysts had been expecting. Revenue rose 47 per cent to $24.9bn, about $500mn above forecasts.
Based on formal accounting principles, earnings per share rose by 13 cents to 78 cents.