TSLA's Q2 earnings beat estimates, EPS clocks in at $0.91

July 20, 2023 (MLN): Tesla (NASDAQ: TSLA) reported its earnings for the second quarter of 2023, wherein the revenue clocked in at $24.9 billion [EPS: $0.91], beating analysts’ estimate of $24.51bn [EPS: 0.82].

However, its automotive gross margin, excluding money made from selling regulatory credits, narrowed to 18%, its lowest since the end of 2017.

The margin, which is an indicator of the cost of sales, was helped, in part, by Tesla’s ongoing efforts to reduce expenses internally, the company said.

After starting the year with a slump due to doubts about its vehicle demand, Tesla's stock has soared by 2.46x year-to-date. The carmaker also faced questions about Musk's commitment to Tesla after he acquired Twitter, the social-media platform, at the end of last year.

Tesla's delivery growth rate slowed down and its quarterly profit dropped for the first time since 2019 compared to the same period last year. Tesla also continued to lower its prices. The average price of a Tesla vehicle in the second quarter was about $45,000, which was $11,000 less than a year ago.

Tesla CEO Elon Musk said, “It does make sense to sacrifice margins in favor of making more vehicles because we think in the not too distant future they will have a dramatic valuation increase.”

Meanwhile, income rose 20% to $2.7bn in the second quarter, buoyed by cheaper materials that helped offset lower vehicle prices. The result beat analysts’ predictions for a slight profit gain from a year earlier.

The company has targeted production growth of 31% this year, however, Elon Musk hinted that it could achieve up to 50%, or 2 million vehicles.

He also said that the company would reduce its output this quarter as it upgrades its factories during the summer.

He added that this would not affect Tesla's target of delivering 1.8m cars to customers this year. Investors were concerned about Tesla's sales performance before the announcement.

Elon Musk warned investors that more price cuts might be needed and that he had already lowered the starting prices in the U.S. by 14% to 28% this year, depending on the model.

“We just don’t control the macro conditions,” Musk told analysts. “If macro conditions are stable, I think prices will be stable. And if they’re not stable, then we would have to lower prices.”

Earnings Call Highlights

In Q2, Tesla produced a record number of vehicles, thanks to the ongoing ramps of our new factories & strong performance of Shanghai & Fremont.

Cybertruck equipment installation at Giga Texas is in progress, with deliveries remaining on track to start later this year.

Model Y was the best-selling vehicle of any kind in the first half of the year in Europe.

Recently, Tesla has started production of Dojo, a training computer, which is expected to make neural net training faster & cheaper.

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