Tesla fell short of Wall Street expectations when the electric-vehicle manufacturer reported a drop in third-quarter earnings.
Tesla's adjusted earnings were $2.3 billion, or 66 cents a share, a 37% decrease from the previous year and its smallest profit in two years, according to news reports.
The EV maker also fell short on third-quarter revenue at $23.4 billion, up 9% from 2022 but below the $24.1 billion forecast by analysts, the company said in its earning report.
Tesla reported its gross margin fell to 17.9%, down seven percentage points year-over-year. CNN reported that the more closely watched adjusted automotive margin, excluding sales from regulatory credits, fell nearly 11 percentage points to about 18%.
Tesla has lowered the cost of producing each vehicle, although its new factories in Texas and Germany have higher costs than its existing plants in California and China, CNN reported.
“We have implemented necessary upgrades in [the third quarter] to enable further unit cost reductions. We continue to believe that an industry leader needs to be a cost leader,” Tesla said in a statement.
The automaker also reported its profits and sales were negatively impacted by the temporary shutdown of production lines for upgrades, which decreased production volumes.
Tesla CEO Elon Musk discussed the effect of increased interest rates on car buyers and Tesla's vehicle demand during a call with analysts. He said higher interest rates are a factor in Tesla's vehicle price cuts this year.
“I am worried about the high interest rate environment that we’re in,’ he said. “I just can’t emphasize this enough that for the vast majority of people, buying a car is about the monthly payment.”
Musk also told investors that high interest rates are behind the delay in Tesla's planned factory in Mexico.
“We want to just get a sense for [what] the global economy is like before we go full tilt on the Mexico factory,” he said during the call. “If interest rates start coming down, we will accelerate.”
The automaker said on the call that it's still on track to deliver 1.8 million vehicles this year. However, to meet that target, CNN reported that Tesla’s fourth-quarter sales must increase by 17% compared to last year's fourth quarter.
On the earnings call, Musk confirmed that the company plans to deliver the long-delayed Cybertruck pickup by year’s end. Still, he warned investors that it may not generate profit right away because of its unique design.
Originally posted on Auto Dealer Today