Tesla’s profit margins are poised to decline in the third quarter, with more significant challenges expected in the final quarter of 2023, sparking concerns among investors that additional price reductions may be necessary to stimulate demand.
The electric vehicle manufacturer has sacrificed some of its profits to boost sales of its aging vehicle lineup, especially in an environment of rising interest rates and increasing competition from China’s BYD (002594.SZ), (1211.HK).
Thomas Martin, a senior portfolio manager at Globalt Investments, a Tesla shareholder, expressed doubts about the conclusion of price reductions, primarily due to the ongoing weakness in demand.
Here are the key points to keep an eye on in Tesla’s earnings report:
1. Delivery Targets: Investors will be scrutinizing how CEO Elon Musk intends to guarantee the company’s ability to deliver a record 476,000 vehicles in the fourth quarter, in line with its annual target of 1.8 million units.
2. Price Reductions: Tesla has already lowered prices for its Model 3 compact sedan and Model Y SUV in the U.S. in October. Last month, it implemented price cuts for its high-end S and X models and unveiled a restyled Model 3 with an extended driving range for certain markets.
3. Global Model 3 Launch: While these price adjustments have been rolled out in the U.S., Tesla is yet to commence deliveries of the revamped Model 3 in China and Europe. A timeline for its U.S. debut has not been disclosed.
Investors and industry analysts will be watching closely to see how Tesla navigates these challenges and whether Elon Musk can deliver on the ambitious delivery targets for the company.
