NEW YORK, April 19 (Reuters Breakingviews) - Tesla (TSLA.O) has been running its own race, but the electric-car maker’s financial results unveiled on Wednesday suggest those days are over. After working hard to prove that customers would buy battery-powered vehicles and that they could be produced profitably, boss Elon Musk is now ceding some of those spoils by slashing prices to boost growth. A big drop in a key margin makes clear the rising technological and competitive threats.
Musk aims to sell 1.8 million cars this year, up 37% from 2022. Deliveries in the first quarter increased only 4% from the previous three months, meaning they’ll have to average 9% higher still for the rest of 2023 to hit the target.
With domestic rivals such as Ford Motor (F.N) putting their full weight behind electric makeovers and Chinese manufacturers gaining ground, growth will be tougher to come by. Musk is weaponizing Tesla’s pole position, using the breathing room its profit provides to slash prices six times in the United States alone in recent months. There were consequences; Tesla’s automotive gross margin, less income from regulatory credits, tumbled to 19% in the first quarter from 30% a year earlier.
Some things are working in the $570 billion company’s favor. The U.S. government is ramping up support for electric cars, introducing new emissions standards that benefit Tesla more than established peers that probably aren’t making money yet from electric models. And pandemic-spurred increases in the costs of microchips and raw materials are leveling off. Using the gap between Tesla’s credits-adjusted automotive revenue and gross profit per car delivered, costs have shrunk 10% from a recent peak.
Maintaining the momentum will be harder. Tesla reckons it can reduce costs by 50% for new designs, bringing a hyped $25,000 car within reach. A new, cheaper model would go a long way. BYD (002594.SZ), for one, is introducing cars that cost as little as $11,600. Tesla’s ageing lineup has lost market share in recent years.
An even bigger concern relates to Tesla’s greatest advantage: batteries. With its partners, it leads the market for huge power storage capabilities and was ahead of peers embracing cheaper and more inventive science. Brands like BYD and Chery, however, are slated to roll out the first cars running on a sodium-ion battery, a potentially disruptive new chemistry that promises to lower prices even further. The danger of being leapfrogged technologically heaps additional pressure on Tesla. After effectively creating the modern electric-car market, Musk faces the challenge of keeping up with it.
Follow @JMAGuilford on Twitter
CONTEXT NEWS
Tesla said on April 19 that it generated about $23 billion of revenue in the first quarter, a 24% increase from a year earlier, while operating income fell to $2.7 billion, down 26%.
Our Standards: The Thomson Reuters Trust Principles.
Bagikan Berita Ini
0 Response to "Breakingviews - Tesla can no longer succeed just on its own terms - Reuters"
Post a Comment