Tesla CEO Elon Musk dropped a bit of a bomb during the company’s shareholder meeting, revealing the company will advertise for the first time in its history.
“We’ll try out a little advertising and see how it goes,” he said during the meeting.
While Tesla enjoyed another record year financially and production-wise in 2022, the market is getting more and more competitive. That showed up in the EV maker’s first quarter results where it missed profit targets due to the multiple price cuts enacted by Musk.
Musk noted there is increased competition and several factors that are going to make it tougher for the company in the months ahead.
“Tesla is not immune to the global economic environment. I expect things to be, just at a macro-economic level, difficult for at least the next 12 months,” he said.
Tough first quarter
The repeated price drops ate into the EV maker’s profit margins, which were expected to come in at 22.4%, according to a Refinitiv poll of 14 analysts; however, the Texas-based automaker’s gross margin only came in at 19.3% — a number other automakers would celebrate.
“We expect that our product pricing will continue to evolve, upwards or downwards, depending on a number of factors,” the company said in a letter to shareholders.
Tesla’s CFO Zachary Kirkhorn promised in January, according to Reuters, that Tesla would not go below automotive gross margins of 20% and an average selling price of $47,000 across models. However, Tesla’s gross margins are usually several percentage points higher than any other automaker.
“We continue to believe that our operating margin will remain the highest among volume OEMs,” the company said in the letter.
More competition, products
Musk has instituted six price cuts and two increases since the beginning of the year. The reasons have never been fully explained, but the steady increase in new electric vehicles hitting the market plus the rules to qualify for federal tax credits are thought to be the big drivers.
The steady stream of new EVs hitting the U.S. market including the Hyundai Ioniq 6, Mercedes-Benz EQE sedan, VinFast VF 8, Genesis GV60, Cadillac Lyriq and more. Tesla’s seen its share of the EV market fall steadily, in part, due to a lack of new products of its own — but that’s about to change, Musk told shareholders.
He said production on the long-awaited Cybertruck begins at the end of this year. Musk noted the company hopes to build about 250,000 of the uniquely styled pickups, but it will depend upon the market. He also said the company’s first second edition model, the new Roadster, also oft-delayed, will begin production next year.
He then noted the company was working on two high-volume, mainstream market EVs, which he expects will notch sales of 5 million units annually — but offered no further details.