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Tesla’s profit margin narrowed in the latest quarter as a series of price cuts hit its earnings this year, according to data released Wednesday.
However, profitability still remained better than many Wall Street analysts expected. Tesla shares are up 137 percent since the start of the year, with most of the gains coming in the past two months as Wall Street lauded its strategy of slashing prices to protect market share in the volatile electric vehicle market.
The company’s gross profit margin from automotive operations, excluding the impact of regulatory credits, fell to 18.2 percent in the last three months. That compared with 18.8 percent in the first quarter of 2023 and 26.2 percent a year earlier.
Analysts were expecting a steep decline in the latest period after Tesla cut prices following a drop in sales at the start of the year. The move reinvigorated sales and second quarter deliveries exceeded expectations. Tesla’s gross profit margin is higher than most traditional carmakers, even at current dismal levels.
Investors are also paying close attention to second-quarter results, believing they represent a bottom line in profit margins. Tesla is working to increase the efficiency of its car production and increase volumes from its new plants in Texas and Germany. It said these efforts played a big role in limiting the decline in its overall operating margin to 9.6 per cent in the quarter, five per cent lower than a year ago.
Thanks largely to working capital improvements, Tesla managed to increase its free cash flow for the quarter from $441 million in the previous three months to $1 billion.
Adjusted earnings per share for the second quarter reached 91 cents, up from 76 cents in the same quarter last year and well above the 82 cents most analysts were expecting. Revenue rose 47 percent to $24.9 billion, about $500 million above forecasts.
Based on formal accounting principles, earnings per share rose 13 cents to 78 cents.
