Tesla reported a modest rise in second-quarter profit amid a more competitive market for electric vehicles than the Elon Musk-led company.
Tesla’s profit from April to June was $2.7 billion, compared with $2.5 billion in the first quarter of this year and $2.3 billion in the second quarter of 2022. Sales increased 7 percent from the previous quarter to $25 billion.
Tesla said lower average selling prices as well as the cost of ramping up a new pickup truck also impacted profit.
An intensifying price war is making electric cars more affordable but putting pressure on profits across the industry. Waiting times for delivery of vehicles are out, and dealers who sold cars with huge markups a year ago are now offering thousands of dollars off.
Tesla is one of the few companies that makes money on electric vehicles, and it dominates the US and European electric car markets. As a result, the company is in a stronger position than other automakers, which are losing billions of dollars on electric cars.
But Tesla has had to cut prices heavily to woo buyers and protect its market share. The company accounted for 59 percent of electric cars sold in the United States in the second quarter, down from 65 percent a year earlier, according to Kelley Blue Book.
The coming year could determine whether Tesla will maintain its dominance. The company said last week that it has begun production of the Cybertruck, a futuristic-looking pickup that will be available for sale by the end of the year and usher in one of the most popular and lucrative parts of the US auto market. The Cybertruck will be Tesla’s first new passenger model after the Model Y goes on sale in 2020.
Unlike the Model Y, a sport utility vehicle that had little competition at the time of sale, the Cybertruck enters a crowded field. Ford Motor offers an electric pickup, the F-150 Lightning, as does Rivian, an upstart carmaker that sells an electric pickup called the R1T. General Motors will soon start selling an electric version of its Chevrolet Silverado pickup.
In a sign of increasing competition, Ford said on Monday it would cut the price of the Lightning by up to $10,000.
Ford said the price cuts were possible because it ramped up assembly lines to produce more trucks, and because the cost of battery raw materials had fallen. But analysts say the cuts reflect a glut of electric vehicles. Ford will also be trying to grab market share before the Cybertruck and electric Silverado are available in large numbers.
Rivian is also becoming a stronger competitor after reportedly overcoming production problems. Its R1T pickup outsold the electric F-150 in the first six months of the year.
Rivian chief executive RJ Scaringe admitted in an interview last month that setting up a smooth production operation was “absolutely challenging”. But he added, “We’ve passed that point of peak pain and are now in this kind of more predictable phase of the ramp.”
In Europe, Tesla is catching up with established carmakers like Fiat as it ramps up production at a factory near Berlin and plans a major expansion of that plant. But Tesla also faces increasing competition in Europe from Chinese automakers such as BYD and SAIC, which sell electric cars using the MG brand. In China, Tesla has had to cut prices to face competition from domestic automakers with new models.
And all carmakers are facing rising interest rates, which increases the monthly loan payments for car buyers. Some banks are no longer willing to lend to borrowers with poor credit history.
Tesla also sells solar panels, batteries for home and grid electricity storage. Company fans often cite those businesses as under-appreciated sources of future growth.
