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EV giant Tesla experienced a drop in Q1 2023 earnings due to underutilized new factories and higher production costs.
Tesla Inc (NASDAQ: TSLA) saw its net income and earnings slide by more than 20% year-over-year (YoY), according to its Q1 2023 report published Wednesday. Nonetheless, the electric vehicle manufacturer’s revenues and profits for the year’s first quarter were on par with consensus estimates.
For Q1 2023, Tesla realized a revenue haul of $23.33 billion compared to the $23.21 billion analysts expected. On the other hand, the company’s earnings per share of 85 cents adjusted matched the consensus estimate.
However, Tesla’s net income plunged 24% YoY to $2.51 billion, primarily affected by its EV price-cutting strategy. The Texas-based EV giant has repeatedly slashed the prices of its four models to boost sales in the US, Europe, and China. These electric vehicle models include Model S, X, Y, and 3.
Amid its substantial Q1 2023 net income drawdown, Tesla realized GAAP earnings of 73 cents which represents a 23% fall YoY. However, the company’s operating expenses remained essentially flat YoY while its capital expenditures increased. Tesla spent $2 billion in capital expenditure (a 17% YoY increase) in the first quarter. Furthermore, the Elon Musk-led corporation experienced a decline YoY in operating margin to 11.4% from 19.2%.
Tesla’s shares dipped 4% in after-hours trading.
Tesla Offers Reasons for Q1 2023 Earnings Underperformance
In a shareholder deck, Tesla posed reasons for the drop in earnings. According to the EV company, “underutilization of new factories”, including increased costs for commodities, raw materials, logistics, and warranty, were causative factors. In addition, Tesla ascribed its relatively underwhelming earnings performance to lower revenue from environmental credits.
On an earnings call, Musk stressed that “uncertain” macroeconomic factors could prevent people from buying cars. As he put it, people will likely postpone “big new capital purchases like a new car” during the hawkish periods. Cautioning that he expected a year of “stormy weather” in the economy, the Tesla CEO also explained:
“Every time that the Fed raises interest rates, that’s the equivalent to an increase in the price of a car.”
Musk also added:
“We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin.”
However, the chief executive expects Tesla vehicles to “generate significant profit” over time through autonomy. In 2016, the EV manufacturer began plans for self-driving technology. Musk had said Tesla would conduct a US experimental run by late 2017. However, that has not been successfully completed.
At Tesla’s annual Investor Day in March 2023, Musk revealed the EV leader’s Master Plan Part 3. The plan prioritized Tesla spearheading the global transition from fossil fuels toward renewable energy. Furthermore, the company looks to centralize its energy storage and generation business to this plan. Tesla also revealed plans to increase revenue from software-related services.
Tesla’s Bitcoin Holdings
Tesla still has its BTC portfolio intact as the company has not touched any of it for the last six months. For the first three months of the year, Tesla’s Bitcoin portfolio is worth $184 million. This is a considerably plunge from Q1 last year when Tesla had BTC worth $1.261 billion.