Big price cuts have put pressure on auto industry-leading Tesla’s gross margin, a closely watched indicator, but Musk has said the company would sacrifice margin to fuel volume growth. For example, Tesla this year cut the prices of its long-range version of the Model Y by a quarter, to $50,490.
Automotive gross margin, excluding regulatory loans, fell to 18.1% in the second quarter from 19% in the first. A year earlier it was 26%.
Tesla reported a global gross margin of 18.2% in the April-June period, the lowest in 16 quarters, compared with 19.3% in the first quarter.
The company on the other hand far exceeded quarterly earnings estimates on the back of strong non-core revenue and very in-line revenue.
“Multiple rounds of aggressive price cuts have put Tesla in a position of strength after building its EV castle and it is now poised to further monetize its success,” Wedbush analysts said in a note.
Tesla reiterated its expectations for deliveries of about 1.8 million vehicles this year, but said third-quarter production would decline slightly due to planned stoppages for factory upgrades.
Lately, a lack of new models has made it difficult for Tesla to take on competitors in China, where flashier offers from local companies have weighed on demand.
Lower prices, coupled with government tax breaks for EV buyers in the United States and other countries, propelled Tesla deliveries to a record 466,000 vehicles in April-July globally, but hurt profitability.
In adjusted terms, Tesla was earning 91 cents per share. Analysts had expected a profit of 82 cents a share, according to Refinitiv data.
The company’s revenue for the April-June period amounted to $24.930 million, compared to estimates of $24.480 million, according to Refinitiv data.