Tesla CEO Elon Musk relied on his favorite fantasy --- full autonomy is almost here! --- to combat legitimate margin concerns, and shares fell even more.
Tesla Inc.’s profit margins are declining amid massive price cuts, and that was almost all that investors and analysts wanted to talk about after the electric-vehicle company released earnings Wednesday. Tesla TSLA Chief Executive Elon Musk had an answer to ease everyone’s concerns, though: Don’t worry, full autonomy is almost here and will solve the margin issue.
Of course, rational people know that is not the truth, and Tesla’s stock price fell more as the call ended, with that as basically the only answer to legitimate concerns about the EV maker’s changing margin profile. “We expect our vehicles over time will be able to generate significant profit through autonomy. So we do believe we’re laying the groundwork here and that it is better to ship a large number of cars at a lower margin and subsequently harvest a higher margin in the future, as we perfect autonomy,” Musk said. “This is an extremely important point.”
That is not what investors wanted to hear, as question after question focused on margins. With a double whammy of increased competition with new electric vehicles from the big auto makers, combined with the soft economy and rising interest rates, Tesla dropped prices on various models and in different markets about five times so far this year alone. That led to a drop in GAAP gross margins to 19.3%, down from 29% in the year-ago quarter.
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