Tesla, the leading electric vehicle manufacturer, has reported a significant increase in its Q2 revenue, surpassing Wall Street expectations. However, the company's gross margin experienced a dip compared to the previous quarter due to the company's efforts to boost sales through price cuts.
The Austin, Texas-based automaker's shares rose by 2% after a brief 2% dip in trading following the announcement. Tesla's strategic move to cut prices and offer increased discounts and other incentives was aimed at reducing inventory. This approach was taken in response to mounting competition and an uncertain economy.
Despite these challenges, Tesla remains focused on reducing costs and developing new products. The company stated that it is still navigating through the "challenges of these uncertain times." Recently, the lack of new models has posed a challenge for Tesla in the Chinese market, where local competitors' more glamorous offerings have affected demand.
The lower pricing strategy, coupled with government tax breaks for EV buyers in the United States and other regions, propelled Tesla's global deliveries to a record 466,000 vehicles in the April-July period. However, this strategy has impacted the company's profitability, which has traditionally been the envy of the auto industry.
Tesla reported a gross margin of 18.2% for the April-June period, the lowest in 16 quarters, compared to 19.3% for the first quarter. On an adjusted basis, Tesla earned 91 cents per share, surpassing analysts' expectations of a profit of 82 cents per share.
Tesla's CEO, Elon Musk, has been doubling down on the price war, indicating that the company would prioritize sales growth over profit in a weak economy amid rising competition. Tesla's share price has more than doubled this year, buoyed by rival automakers endorsing Tesla's charging standard, expanded federal credits for Model 3s, and investor excitement over artificial intelligence.
Despite the challenges, Tesla's Q2 revenue reached $24.93 billion, exceeding the estimated $24.48 billion. However, the company signaled that it has "more work to do to reaccelerate our growth," with a core focus on "engagement," driven by a steady stream of new films and TV series.
