Tesla recently reported its smallest profit in two years, feeling the pinch from a pricing battle in both China and the US.
Under the leadership of Elon Musk, the company experienced a 9% sales increase in the quarter ending October, selling more units than the same quarter of the previous year.
Yet, profits dwindled by 44%, settling at $1.9 billion (£1.6 billion). The company’s operating margins, a key profitability metric, declined from 9.6% a quarter ago to 7.6%.
This year, Tesla has initiated numerous price reductions to maintain demand in the face of escalating competition. Elevated electricity costs in certain countries have also dampened the demand for electric cars.
On a recent Wednesday, Tesla highlighted its measures to cut internal expenses, thereby reducing car production costs. The firm emphasized its belief that “an industry leader needs to be a cost leader.” The decline in profit is also attributed to increased spending on endeavors like the development of artificial intelligence for their autonomous driving tech.
Earlier indications pointed towards a deceleration in Tesla car sales. The company disclosed earlier this month that deliveries had dropped from Q2 figures.
BYD, a leading electric car producer in China, is on the verge of outpacing Tesla’s sales, and it’s anticipated to do so by year-end.
Just this Tuesday, Tesla slashed the price of its Model 3 in the UK, making the base model £3,000 more affordable. The company has been proactive in adjusting prices in the US and China, its primary markets.
There have been concerns about Musk’s focus, especially after his acquisition of Twitter last year and his investment in the AI startup, x.ai.
Tesla is gearing up for the Cybertruck’s launch, which has experienced delays. Moreover, Musk has expressed intentions to introduce a more affordable $25,000 car and a fully self-driving “robotaxi.”
