Elon Musk’s electric car company is facing intensifying competition from newer Chinese automakers and established Western car companies.Tesla reported a rise in profit for the second quarter after the company, led by Elon Musk, cut prices in response to increased competition and higher borrowing costs for car buyers.
The company said on Wednesday that it earned $2.7 billion from April through June, up from $2.5 billion in the first quarter this year and $2.3 billion in the second quarter of 2022. Sales rose 7 percent, to $25 billion, from the first quarter.
Lower average sales prices, as well as the cost to produce a new pickup truck, weighed on profit, Tesla said.
Tesla might have to cut prices further, Mr. Musk said, noting that higher interest rates make it harder for people to afford new cars“We don’t control the macroeconomic conditions,” he said during a conference call with analysts and investors. “If macroeconomic conditions are stable, prices will remain stable. If macroeconomic condition are not stable, we would have to lower prices.”
Tesla shares were down about 4 percent in extended trading on Wednesday.
An intensifying price war is making electric cars more affordable but putting pressure on profits across the industry. Wait times for delivery of vehicles have evaporated, and dealers that sold cars with hefty markups a year ago are now offering discounts of thousands of dollars.
Tesla is one of the few companies that make money on electric vehicles, and it dominates the U.S. and European electric car markets. As a result, the company is in a stronger position than other automakers that are losing billions of dollars on electric cars.
But Tesla has had to sharply cut prices to lure buyers and defend its market share, leading to a lower profit margin on car sales. The company made 59 percent of the electric cars sold in the United States in the second quarter, down from 65 percent a year earlier, according to Kelley Blue Book.
The coming year could determine whether Tesla retains its dominance. The company said last week that it had begun producing the Cybertruck, a futuristic-looking pickup that will go on sale by the end of the year, entering one of the most popular and lucrative parts of the U.S. auto market. The Cybertruck will be Tesla’s first new passenger model since the Model Y in 2020.Unlike the Model Y, a sport utility vehicle that had scant competition when it went on sale, the Cybertruck enters a crowded field. Ford Motor offers an electric pickup, the F-150 Lightning, and Rivian, a fledgling carmaker, sells one called the R1T. General Motors will soon begin selling an electric version of its Chevrolet Silverado pickup.In an indication of the intensifying competition, Ford said on Monday that it would cut the price of the Lightning by up to $10,000.
Ford said the price cuts were possible because it had ramped up assembly lines to produce more trucks, and because the price of battery raw materials had fallen. But analysts said the cuts reflected a glut of electric vehicles. Ford could also be trying to seize market share before the Cybertruck and the electric Silverado become available in significant numbers.
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