No first-quarter figures for 2023 were as anticipated as those from Tesla. Kickstarting a price war in the EV category and defying the other car makers, curiosity about side effects on income was high. For Tesla, gaining that market share comes at the cost of earnings dropping by more than 20%.

The good news was already known. Tesla shipped a record number of 422 875 units during the first three months of the year, a better result than predicted by analysts leading to an increase in revenue of 24% year-on-year. However, in 2022, the first quarter was heavily affected by lockdowns in its Shanghai Gigafactory, which served as an important global hub back then.

Down by 24%

It shouldn’t come as a surprise that Tesla’s recently ignited price war, with some car models like the Model 3 now costing 20% less than the previous year, resulting in a similar impact on earnings. Net income settled on 2.51 billion, with adjusted earnings reaching 85 cents per share.

The drop in net income is a significant 24%. Previously, operating margins fluctuated around 15 percent (which is exceptionally high), but these have now fallen back to 11.4 percent during Q1 2023, a logical consequence of the price cuts. However, most car makers would sign presto for such an operating margin. All in all, the figures align with analysts’ predictions.

More culprits

Tesla mentions more than the lowered ticker prices as a reason behind dwindling income. Rising raw material prices, commodities, logistics, and slipping revenue from the carbon credits it sells to other car makers (these were down from 679 dollars during Q1 2022 to $521 million, but the company granted for this scenario) are further culprits.

“We’ve taken the view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin,” commented Tesla CEO Elon Musk after the presentation. He also added that he was expecting “stormy weather” for the whole year, as global uncertainty will affect the car shopping plans of customers.

Keeping the faith

It is also essential to distinguish between the revenue and income from the automotive department and the other operational activities. The car division accounted for the lion’s share in the revenue of $19.96 billion. Tesla Energy, responsible for domestic backup batteries and energy storage systems, grew by 148%.

The financial results won’t affect the outlined strategy. As Tesla aims to deliver 1.8 million units this year, it announced further price cuts on the evening before posting the quarterly report. The company also repeated its output objective during the earnings call, as the new factories are gradually reaching weekly production goals. It also acknowledged that the ramp-up of the Cybertruck, expected to launch by the end of the year, is on schedule. As the assembly of the Semi Truck is still in the pilot phase, it’s not part of the quarterly figures.