Elon Musk Says Tesla Would Cut Prices Again In "Turbulent Times"

Tesla's CEO would do so at the risk of squeezing the company's own margins.

Tesla Model Y

Dan Mihalascu

By: Dan Mihalascu

Jul 20, 2023 at 6:38am ET

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Tesla shook up the EV market late last year when it applied massive price cuts on its models in the United States, China, and Europe. The automaker slashed prices on several occasions since, but the situation has largely stabilized this summer.

That said, Tesla CEO Elon Musk announced he would cut prices again on electric vehicles in "turbulent times" at the risk of squeezing the company's own margins.

Speaking during Tesla's Q2 2023 earnings call on Wednesday, Musk told analysts that the world economy is in turbulent times, and this sometimes calls for difficult decisions.

"One day it seems like the world economy is falling apart, next day it's fine. I don't know what the hell is going on. We're in, I would call it, turbulent times."

Musk said in the past that Tesla would sacrifice margins to drive volume growth, and he reiterated that yesterday.

Gallery: Tesla Model Y

Tesla Model Y

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Tesla Model Y

"I think it does make sense to sacrifice margins in favor of making more vehicles," he said, adding that if macroeconomic conditions were not stable, Tesla would have to lower prices. Tesla shares fell nearly 5 percent after Musk's comments.

According to Reuters' calculations, the EV maker's quarterly automotive gross margin, excluding regulatory credits, fell to 18.1 percent in the second quarter from 19 percent in the first quarter. While that was in line with Wall Street estimates, it's still a far cry from the 26 percent Tesla reported a year earlier.

Tesla reported overall gross margin for the April-June period of 18.2 percent, the lowest in 16 quarters. This was largely a consequence of price cuts. Tesla this year slashed US prices of the Model Y long range version, it’s best-selling vehicle, by a quarter to $50,490.

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Earlier this year, Tesla said in a statement it was focusing on reducing costs and on new product development, adding that the "challenges of these uncertain times are not over."

The company reiterated its expectations of achieving deliveries of around 1.8 million vehicles this year, but warned that production in the third quarter would decrease slightly due to planned downtimes for factory upgrades.

More stories from Tesla's Q2 2023 earnings call

Tesla Provides Cybertruck Updates, New Production Line Images

Tesla Will Allow Owners To Transfer FSD To A New Car, With A Catch

Source: Reuters

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