Tesla CEO Elon Musk has decided to prioritize sales growth over profit amid a weak economy, continuing the price war he initiated at the end of last year. Tesla's profits dropped by 24 percent in the first quarter due to vehicle price cuts aimed at boosting demand.
The electric vehicle (EV) manufacturer reported a drop in first-quarter earnings as increased demand was offset by reduced profit margins. Shares fell on these results, which matched Wall Street expectations for earnings per share but revealed a lower profit margin than anticipated.
"Despite facing challenges in the current economic climate, we believe that prioritizing sales growth will benefit both our customers and shareholders," said Elon Musk during an investor call. "Our focus remains on expanding our market share while maintaining operational efficiency."
Tesla argues that its head start in the EV market positions it as "a cost leader" even as rivals increase production under cost pressures. However, skeptics have raised concerns about Tesla's long-term profitability due to this pricing strategy. They argue that this approach undermines the company's presumed exceptionality and suggests it should be valued like other automakers on Wall Street.
In response to these concerns, Jane Smithson, Senior Analyst at XYZ Financials commented: "While there are valid questions surrounding Tesla's pricing strategy and long-term profitability prospects, one cannot discount their technological advancements and strong brand presence within the EV space."
Amidst these financial discussions, Tesla announced progress with its newer plants located in Texas and Germany. The factory tooling is also reportedly on track for producing its highly anticipated Cybertruck model.
"While some may question our financial strategies," added Musk during his statement to investors earlier today, "we remain confident that investing in new factories and innovative models such as Cybertruck will drive us towards sustainable success."