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Tesla’s revenue fell short of Wall Street’s reduced expectations in the latest quarter and its core profit margins sagged, as planned factory shutdowns and price cuts dented the US electric-car maker’s performance.
The company’s shares fell more than 3 per cent after chief executive Elon Musk used a conference call with analysts to issue a downbeat outlook, warning that high interest rates would continue to limit the affordability of Tesla’s vehicles. He also said that next month’s planned launch of a long-awaited electric pick-up, known as the Cybertruck, would be followed by an “extremely difficult” production ramp-up that would take at least 18 months.
Wall Street had been expecting the latest quarter to mark a low point in Tesla’s profit margins, following price cuts the company made to stoke demand earlier in the year. But Musk’s comments added to worries that weaker demand and problems building the pick-up truck might slow the rebound in profitability many have forecast.
“We dug our own grave with Cybertruck,” he said, thanks to the vehicle’s angular design and unusual stainless steel body. “It is going to require immense work to reach volume production and be cash flow positive at a price people can afford.”
Excluding the impact of regulatory credits, the gross margin from Tesla’s automotive operations — a closely watched measure of its core operations — dropped to 16.3 per cent in the third quarter, its lowest level since the final three months of 2017. That was below the 17 per cent most analysts had expected, after slipping from 18.1 per cent in the second quarter and 26.8 per cent a year ago.
“I am worried about the high interest rate environment we’re in,” Musk said. He added that Tesla had begun to advertise its cars — something it has avoided in the past, in contrast to other carmakers — but that this would do little to lift demand if interest rates didn’t come down.
Tesla reported net income in the third quarter of $1.85bn, down 44 per cent from a year before, while earnings per share on the pro forma basis on which Wall Street judges the company fell 37 per cent to 66 cents.
Revenue grew 9 per cent to $23.35bn. Wall Street had been expecting pro forma earnings per share of 73 cents on revenue of $24.1bn.
The company had already revealed it delivered fewer new vehicles in the quarter than most analysts had expected, even after Wall Street forecasts had been lowered to reflect the impact of the factory downtime.
The production halts were to prepare for a revamped Model 3 and the Cybertruck. Deliveries reached 435,059, up 27 per cent from the year before but some 20,000 below most analysts’ predictions.
Before Musk’s latest comments to Wall Street, Tesla shares had risen 9 per cent over the past 12 months as investors bet that its industry-leading profit margins would give it room to cut prices to bolster its market share, even as rivals face growing losses from their EV programmes.
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