Tesla released more numbers yesterday after announcing quarterly figures for vehicles produced and delivered for Q1 2023 in early April. It was eagerly awaited to see how the massive price cuts would affect the figures. Looking closely at the numbers, it became clear that revenue was down slightly, but profit was down noticeably. Despite this, Tesla is still posting a significant profit. In Q1 2023, Tesla's total revenue was $23.33 billion, with the automotive division alone accounting for $19.96 billion. In comparison, total revenue in 1Q2022 was $18.76 billion, while Tesla's 4Q2022 total was a best of $24.32 billion. However, Tesla's profitability has declined noticeably, as seen in its GAAP surplus statistics. In 1Q2023, Tesla reported a profit of $2.51 billion, down 24 percent from $3.32 billion in the year-ago quarter and down 32 percent from $3.69 billion in the previous quarter.
In terms of Tesla's quarterly figures, the operating margin is of particular interest. Between January and March of this year, it dropped significantly to 11.4 percent, having previously been consistently around 15 percent. In Q1/2022, it even reached an outlier upward of 19.2 percent and in Q3/2022 it was 17.2 percent. The expected collapse of the margin due to the global price reductions has thus occurred. Tesla cites the reduced average vehicle price, as well as higher costs for raw materials, logistics and warranties as reasons for the lower profitability. In addition, the company is currently investing heavily in the expansion of 4680 cell production, according to its own statements.
Tesla has commented extensively on the industry's highly debated global price cuts, stressing that the company is looking to build on its position as a cost leader while many automakers struggle with the economics of their EV programs. Tesla's near-term pricing strategy takes into account a long-term perspective on per-vehicle profitability, and prices will continue to be influenced by a variety of factors. Despite price cuts on many vehicle models in all regions in the first quarter, Tesla's operating margins have declined manageably, but the company continues to believe its operating margin will remain among the highest in the industry.
Recently, Tesla announced that the price reduction is mainly due to exponentially scaled and improved manufacturing capacity in its global factories. The company had already indicated in its 2022 financial statement that improving affordability is key to its goal of becoming a million-dollar vehicle manufacturer.
