Tesla reported a modest increase in second-quarter earnings amid an ever-more-competitive electric-vehicle market for Elon Musk’s company.
Tesla made $2.7 billion in April-June profit, up from $2.5 billion in the first quarter of this year and $2.3 billion in the second quarter of 2022. Revenue increased 7% from the prior quarter to $25 billion.
Tesla said lower average selling prices and the cost of adding new pickup trucks weighed on profits.
Intensifying price competition is making electric vehicles more affordable, but squeezing profits across the industry. There is no longer a waiting time for a car to be delivered, and dealers who were selling cars at hefty markups a year ago are now offering thousands of dollars in discounts.
Tesla is one of the few companies profitable from electric vehicles, and it dominates the electric car market in the United States and Europe. As a result, the company is in a stronger position than other automakers that have lost billions on electric vehicles.
But Tesla has been forced to cut prices sharply to attract buyers and protect its market share. The company made 59% of all electric vehicles sold in the U.S. in the second quarter, down from 65% a year earlier, according to Kerry Blue Book.
Next year may determine whether Tesla can maintain its dominance. The company announced last week that it will begin production of its futuristic-looking Cybertruck pickup truck, which will go on sale by the end of the year, entering one of the most popular and profitable segments of the U.S. auto market. The Cybertruck will be Tesla’s first all-new passenger car model since the Model Y launched in 2020.
Unlike the Model Y, a sport utility vehicle that had few competitors when it was launched, the Cybertruck entered a highly competitive field. Ford Motor Company offers an electric pickup, the F-150 Lightning, as does Rivian, an upstart automaker that sells an electric pickup called the R1T. General Motors will soon begin selling an electric version of its Chevrolet Silverado pickup.
In a sign of increased competition, Ford on Monday said it would cut the price of the Lightning by up to $10,000.
Ford said it was able to cut prices because it ramped up its assembly line to make more trucks and because the price of battery raw materials fell. But analysts said the cuts reflected a glut of electric vehicles. Ford may be trying to grab market share before the Cybertruck or the electric Silverado sells in bulk.
Rivian has also reportedly overcome production problems and is becoming a stronger contender. Its R1T pickup has outperformed the electric F-150 in the first six months of the year.
Rivian chief executive RJ Scaringe admitted in an interview last month that establishing a smooth production operation had been “genuinely difficult.” However, “we have passed some of the pain peak and are now entering a more predictable ramp phase,” he added.
In Europe, Tesla is ramping up production at a factory near Berlin and planning a large-scale expansion at the same factory, closing in on established automakers such as Fiat. But Tesla also faces increasing competition from Chinese automakers such as SAIC Motor, which sells electric cars in Europe under the BYD and MG brands. In China, Tesla has had to cut prices to keep up with competition from domestic automakers offering newer models.
And all automakers are dealing with rising interest rates, increasing monthly loan payments for car buyers. Some banks no longer lend to borrowers with weak credit histories.
Tesla also sells solar panels, home batteries, and batteries for grid power storage. Fans of the company often cite these businesses as undervalued sources of future growth.
