That was a good quarter, Tesla said Sunday. Second-quarter deliveries rose 83% from a year ago after the company cut prices several times on its four electric vehicle models and buyers took advantage of US government tax credits. The Austin, Texas, producer of EV, solar panels and batteries said it sold a record 466,140 vehicles worldwide from April through June, nearly doubling the 254,695 of the same period a year earlier, the AP reports. The vast majority of the sales were the popular Model 3 and Model Y versions. But the price cuts, both for special orders and on existing inventory, raised questions from analysts who expect the cuts to reduce Tesla's profit margins when it announces second-quarter earnings on July 19.
Sales were better than Wall Street expectations. Analysts polled by data provider FactSet had expected deliveries of 445,000. The company produced 479,700 vehicles from April through June, about 13,000 more than it sold, indicating that inventories may be building. The second-quarter sales bring Tesla to nearly 900,000 vehicles for the first half of this year. The company sold 422,875 vehicles from January through March. CEO Elon Musk has predicted that sales will grow about 50% per year for the near future. To reach that level 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.
Wedbush Analyst Dan Ives said price cuts boosted sales, especially in China, but there will be a price to pay in reduced profit margins. He expects Tesla's margins to hit bottom during the next two quarters, recovering to normal levels next year, per the AP. "We're going to likely see the price cuts have weighed on margins," Morningstar analyst Seth Goldstein said. Tesla's automotive gross profit margin (excluding regulatory credit revenue), the company's gross profit compared to revenue, was as high as 30% early last year. But as interest rates rose, Tesla began cutting prices last year, and the margin fell to 19% in the first quarter. Analysts expect 16.9% from April through June, according to FactSet.
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