Tesla, the electric vehicle (EV) and energy company, reported a net income of $2.51 billion in the first quarter, a 24% decrease from the same period last year. The company’s strategy of reducing prices for its EVs, including the Model S, Model X, Model Y and Model 3, has boosted sales, resulting in revenue of $23.3 billion, a 24% increase YoY.
However, the price-cutting strategy has led to squeezed gross margins for the automaker, with its operating margin falling from 19.2% in Q1 2022 to 11.4% in the current quarter.
Tesla’s free cash flow for the first quarter was $441 million, an 80% drop from the same period last year. The company’s automotive revenue, including $521 million in zero emissions tax credits, was nearly $19.9 billion, an 18% increase YoY.
Revenue from Tesla’s energy generation and storage business hit a record $1.5 billion, an increase of 148% from the same quarter last year, driven by the company’s rapid growth in energy storage production capacity and the Megafactory ramp in Lathrop, California.
Tesla CEO Elon Musk’s Master Plan Part 3, revealed at the company’s annual Investor Day in March 2023, focuses on the global shift towards renewable energy, with energy storage and generation being a significant part of that plan. Tesla’s recent announcement of a new Megafactory in Shanghai with 40 GWh of capacity shows the company’s commitment to expanding its energy storage business.
Despite the drop in net income and share prices falling 4% in after-hours trading, Tesla continues to generate most of its revenue from EV sales, with growth in energy storage and solar departments. The company faces challenges in maintaining profitability as it balances price cuts to boost sales with increased capital expenditures and operating expenses.
However, Tesla’s commitment to renewable energy and energy storage production could offer opportunities for long-term growth and profitability.