Tesla Inc. (TSLA.O) Q2 2023 results are outstanding and it delivered a record number of vehicles in the Q2, topping market estimates as price cuts and U.S. federal credits helped in making the electric vehicles more affordable. Tesla’s Q2 delivery result shows an all-time high rise of up to 83% from a year ago which exceeds the expectations after the company cut prices several times on its four electric vehicle models with buyers taking advantage of U.S. government tax credits.
Tesla second-quarter delivery numbers
CEO, Elon Musk has predicted that sales will grow about 50% per year for the near future. To reach that number for the full year, the company would have to sell 1.97 million vehicles. Analysts expect Tesla to fall a little short, delivering 1.82 million vehicles for the year.
Meanwhile, Tesla has notched up a series of wins in the EV fast charging space with companies such as Ford Motor and General Motors, as well as fast charging equipment makers agreeing to adopt the firm’s North American Charging Standard (NACS).
Tesla delivered 466,140 vehicles in the April to June period resulting in a 10% increase in delivery from the preceding quarter, and 83% higher from a year earlier which is an all-time high. The Elon Musk led company delivered over 466,000 vehicles in the three months ended June 30.
Analysts on average had expected Tesla to deliver 445,000 cars, according to nine analysts polled by Refinitiv, with the lowest estimate at 439,875 and highest at 450,000.
The EV automaker produced 13,560 more vehicles than it delivered in the second quarter, although the gap has narrowed from 17,933 during the first quarter.
Tesla price cut a good move
“The price cuts was a smart poker move for Tesla and paying major dividends in the field especially for the China market,” Dan Ives, an analyst at Wedbush Securities, said.
Tesla is expected to hit record sales in China, its second-largest market after North America, despite stiff competition from market leader BYD.
“We believe margins will trough the next few quarters,” Ives added.
Tesla has cut prices starting in China since late last year, eroding its Q1 margins. In April, Elon Musk doubled down on the price war, saying the EV maker would prioritize sales growth ahead of profit in a weak economy and rising competition.
It has increased discounts across all of its line ups up to $1,600 to $7,500, in a move seen to reduce inventory, while making all of its Model 3s eligible for full federal credits of $7,500 starting in June in the United States.
The company delivered 446,915 Model 3 compact cars and Model Y sport utility vehicle, as well as 19,225 of its Model S and Model X premium vehicles.
Earlier this year, Tesla slashed prices globally by as much as 20% after missing Wall Street delivery estimates for 2022.
Tesla said total production rose 85.5% to nearly 480,000 vehicles in the three months ended June 30, from a year earlier.
Wedbush Analyst, Dan Ives said price cuts have boosted sales, especially in China, but with reduced profit margins. He expects Tesla’s margins to hit bottom during the next two quarters, recovering to normal levels next year.
“We’re going to likely see the price cuts have weighed on margins,” Morningstar analyst Seth Goldstein said.
Tesla’s gross profit compared to revenue, was as high as 30% early last year. But with rising interest rates, Tesla began cutting prices last year, and the margin fell to 19% in the first quarter.
Ives said Tesla’s U.S. inventory is starting to grow. “That’s going to be a bit of an overhang going into the second half of the year,” he said.
Tesla is not just relying on deliveries. With General Motors, Ford, Rivian and Volvo announcing that they’ll join Tesla’s charging network and start using its plug, Tesla will get millions in charging revenue.
“I do believe investors are starting to appreciate the sum of the parts story,” Ives said.
Shares of Tesla have more than doubled in value this year, largely on news that General Motors and Ford are joining the company’s charging network. Tesla shares closed Friday at $261.77.
Goldstein expects Tesla to ramp up production at new factories in Austin, Texas, and in Germany, which will result in further reduction in the company’s fixed costs. “I think we’re likely looking at the bottom in the first half of this year, and then margins will slightly recover from there,” he said.
