Tesla CEO Elon Musk stated that the electric carmaker might continue reducing prices amid the uncertainty of the global economy. The company faced tough competition, leading to squeezed profit margins. Tesla has already slashed prices multiple times in key markets like the US and China. This news caused Tesla’s shares to fall more than 4% in after-hours trading in New York.
The company reported its lowest profit margin in four years, with the gross profit margin dropping to 18.2% for the three months ending in June, compared to 26.2% for the same period last year. During a call with Wall Street analysts, Musk expressed openness to further price cuts if necessary, citing the turbulent times of the world economy.
Investors are concerned about the potential for more price cuts, fearing a price war with no clear long-term strategy to raise margins. Musk had previously defended pursuing higher sales with lower profits as the right choice for Tesla. To compete with rival manufacturers, Tesla has been lowering prices in the US, UK, and China.
Despite the challenges, Tesla recently achieved a record number of vehicle deliveries in the second quarter. Additionally, other carmakers, including Nissan, have agreed to adopt Tesla’s electric vehicle charging technology, with Nissan planning to equip its EVs in the US and Canada with Tesla-developed charging ports from 2025. This move aims to make electric mobility more accessible.