Tesla CEO Elon Musk is willing to continue reducing prices on electric vehicles. The company has been engaged in a fierce price war with other automakers, leading to increased pressure on Tesla’s profit margins. To counter competition and economic uncertainties, Tesla has implemented multiple price reductions and offered increased discounts to reduce inventory.
During a conference call with analysts, Musk expressed uncertainty about the global economy, describing the current times as “turbulent.” These price-cutting measures, while impacting Tesla’s automotive gross margin, have become essential to prioritize and stimulate volume growth.
Musk asserted that sacrificing margins to increase vehicle production makes strategic sense. He emphasized that if macroeconomic conditions become unstable, Tesla would consider further price reductions to remain competitive.
One recent example of Tesla’s price adjustment was seen in the US, where the Model Y long-range version’s price was reduced by a significant quarter, now priced at $50,490.
Tesla’s quarterly automotive gross margin, excluding regulatory credits, declined to 18.1% in the second quarter, down from 19% in the first quarter and considerably lower than the 26% reported a year ago. The overall gross margin for the April-June period was recorded at 18.2%, marking the lowest in 16 quarters.
Despite the challenges, Tesla remains committed to cost reduction and new product development as it navigates through these uncertain times.
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