Tesla struggled to build momentum in the third quarter, causing it to stumble on earnings and miss analyst forecasts.
From July through September, the electric vehicle company generated $23.4 billion in revenue on deliveries of 435,000 units. The number represents an 8.8% increase over the $21.5 billion it earned in Q3 2022 but a decline of roughly 6% from Q2 2023. Analysts had expected Tesla to make more than $24 billion by the end of the quarter. The EV maker’s $2.3 billion in net profit was also behind forecasts, falling short of consensus estimates by roughly $260 million. Compared to the $3.33 billion it made in Q3 2022 and $2.7 billion in Q2 2023, the company’s net income has declined 30.1% in 12 months and 14.8% in three months, respectively.
Several factors placed downward pressures on the company’s profits over the third quarter. For one, deliveries slowed towards the end of summer due to planned production halts at several Tesla factories, shrinking by approximately 6.7%. During a previous earnings call, CEO Elon Musk told shareholders that the automaker would be closing these facilities to implement manufacturing upgrades after Q2 and warned that sales would likely suffer as a result. The brand’s Q3 production and delivery report reiterated the point.
Another reason for the shift is the company’s newfound interest in affordable pricing. Since the start of the year, Tesla has implemented a multitude of price adjustments, causing price tags on some of its models to drop double percentage points from 2022. The company was hoping the strategy would boost demand, especially in conjunction with the Biden Administration’s $7,500 EV tax credit, and help mitigate a rising inventory surplus. Despite delivering a record number of vehicles in the second quarter of 2023, its struggle to maintain the same speed in Q3 is likely to worry shareholders, many of whom were against the discounts.
To meet its delivery target of 1.8 million units for 2023, Tesla will need to sell roughly 500,000 units in the next two and a half months. This would be more than its previous record set in the second quarter. However, with some automakers also reporting a slump in EV demand and others delaying the release of new models until the market grows, it is uncertain whether the brand will be able to reach its goal without further price cuts.
