Tesla Plunges as Price Cuts Hurt Margins

Tesla (TSLA:US) stock was offered below $170 per share on Thursday after the electric vehicle (EV) maker reported soft Q1 results on Wednesday after the market closed. 

Tesla delivered a profit per share of $0.85 on revenue of $23.33 billion, which compares to the analyst consensus for EPS of $0.85 on revenue of $23.21 billion, according to Refinitiv. 

Net income slumped 24% to $2.51 billion with Tesla blaming the slow ramp from new factories (Texas and Berlin), as well as higher raw material, commodity, logistics and warranty costs, and lower revenue from environmental credits, as key reasons behind the soft Q1 performance.

“Every time that the Fed raises interest rates, that’s the equivalent to an increase in the price of a car,” CEO Elon Musk said on the earnings call.

The billionaire also said he expects 12 months of “stormy weather” in the U.S. economy. As a result, the company said it expects to continue cutting prices, a piece of information that likely triggered an after-hours selloff in Tesla shares.

More worryingly, Tesla reported a gross margin of 19.3%, below the 22.4% expected and 29.1% reported for the same period last year. This is despite Tesla’s management saying on the Q4 earnings call that full-year margins should be 20%.

The Q1 earnings report comes after several Congress members reported transactions involving Tesla stock in recent months. More recently, Congress members Ro Khanna and Daniel Goldman were both buying the stock at prices higher by at least 10% relative to current market trading price.