Can Tesla's story be closed-looped?

Financial data

In Q1 2023, Tesla's revenue was $23.33 billion, up 24% year over year but down 4% sequentially, and net profit was $2.513 billion, down 24% YoY and lower than market expectations.
Gross profit margin further decreased from 23.8% in Q4 2022 to 19.3%, falling below the critical 20% mark. In Q1 2023, Tesla's gross margin fell below 20% to 19.3%. In addition, Tesla broke with convention and did not disclose its automotive gross margin, which has always been one of the most closely watched indicators of its profitability.
Analysts had predicted Tesla's gross margin for this quarter to be between 18% and 20%, and the final result was generally in line with expectations. However, because the figure fell below 20% to its lowest level since the end of 2020, it breached the psychological defenses of some investors.

Marketing stance

"In today's environment, it's difficult for us to make predictions," CFO Zachary Kirkhorn said. "There is too much uncertainty in the macro environment." Tesla executives refuse to provide any guidance.
"Whenever there is economic uncertainty, people tend to postpone buying cars. It's human nature," Musk said. "If people see news about layoffs in the media, they may worry about being fired and naturally hesitate to buy cars." Musk blamed the poor performance on the Federal Reserve, defended Tesla's price cuts, and said that the Fed's continued rate hikes had caused car prices to rise indirectly.
"It's better to ship a large number of cars at a lower margin and subsequently harvest that margin in the future.")Musk responded with the "deferred gratification" argument. He told investors that in the long run, as revenue from Supercharging, autonomous driving, and other features continues to grow, profits will also remain strong.
"Scaling affordability through price reductions." On April 16, Musk responded on Twitter, saying that Tesla was not launching a price war. Thanks to its price and brand advantages, in the United States, the Tesla Model Y was the best-selling electric car in February and ranked among the top three in the overall car market.
In Europe, Tesla is also the hottest new energy vehicle brand at present, selling 12,000 vehicles in Germany alone in February this year, and in the Asia-Pacific region, Tesla also occupies a relatively high market share. Due to Tesla's leading position, its price cuts over the past six months have been seen as the beginning of a "price war."
Tesla was absent from the recent Shanghai Auto Show in China.

Product changes

In the first quarter of this year, although Tesla's delivery volume reached nearly 423,000 vehicles, a new high, the month-on-month growth was only 4%, lower than Wall Street's expected 432,000 vehicles.
The gap between production and delivery mainly came from the higher-priced Model S/X. In the previous quarter, these two models produced a total of 19,437 vehicles, but only delivered 10,695 vehicles, with the production of almost twice the delivery volume. On April 19th, Tesla's official website in the United States showed that multiple models, including the Model 3 and Model Y, had once again lowered their prices by around 4.7% to 6%. Among them, the price of the Model 3 rear-wheel drive version was lowered by $2,000 from $41,990 to $39,990, marking the official drop of Tesla's lowest price below $40,000.
At the same time, there were rumors that Tesla's Model 3 and Model Y in the Chinese mainland market would see a price reduction this Saturday, with the Model 3 having the highest reduction of 43,000 yuan and the Model Y series reducing by 46,000 yuan. In response, Tesla stated that the rumor was untrue.
In addition, Tesla is also developing ambitious expansion and increased capital expenditure plans. In early March, Tesla announced plans to build a super factory in Mexico at its investor day event, and earlier this month, the energy storage super factory project signing ceremony was held in Shanghai.

Stock price changes

After the financial report was released, Tesla's stock price fell more than 6% in after-hours trading.

Policy benefits

As the first 100% foreign-owned car company in China, according to the original agreement, Tesla enjoyed a discounted corporate income tax rate of 15% from 2019 to 2023, while other companies had a tax rate of 25%. Previously, with other benefits added, Tesla's effective tax rate was even lower than 15%. However, this preferential treatment will expire at the end of this year, and Tesla's profitability may come under further pressure. Under this backdrop, in order to avoid being adversely affected by a "price war," Tesla must either make breakthroughs in cost control or show actual progress in new models.