Elon Musk said he expects Tesla sales to reach 2 million this year after the company’s aggressive price cuts. His bullishness came after Tesla reported better-than-expected fourth-quarter results on Wednesday.
Yet the firm saw a decline in vehicle gross margin, indicating that margin is being sacrificed for volume, said a Wedbush analyst. Elon Musk is discussing the possibility of selling 2 million Tesla vehicles this year after a recent price cut.
But a Wedbush analyst says the carmaker is having to sacrifice margin for volume. Musk’s upbeat outlook topped Wall Street’s expectations after the electric-vehicle maker reported fourth-quarter earnings on Wednesday. The company said its revenue rose 37% to $24.32 billion, beating the market’s estimate of $24.16 billion.
In an earnings call with analysts, Musk said he expected car deliveries to reach 2 million this year, according to Reuters. This is despite the fact that he is predicting a very hard recession this year. “We expect demand to remain strong despite contraction in the overall automotive market,” Elon Musk said on the call.
Following Tesla’s strong earnings, the carmaker has recently made some aggressive price cuts to boost demand. This led to reductions in prices in global markets, including a reduction of up to 20% for the Model Y SUV in the US. These price changes really make a difference to the average consumer, Elon Musk said, according to Reuters.
Despite the loss in earnings, Tesla’s automotive gross margin declined to 25.9%, the lowest in five quarters. Elon Musk said the disappointing figures reflect increased costs, higher raw material and commodity prices.
According to Dan Ives, an analyst at Weinbush Securities, this suggests that the company is facing downgrades in order to increase sales volume. Ives told CNBC on Wednesday that he ultimately needed to sacrifice margin for volume. , And now the question is what does the trajectory look like in 2023 considering the ongoing price war in China.
[“These price changes really make a difference for the average consumer,” Elon Musk said on Wednesday’s earnings call.]