Elon Musk is gung-ho on the prospect of selling 2 million Tesla vehicles this year after recent price cuts, but a Wedbush analyst says the carmaker is having to"sacrifice margins for volume." fourth-quarter earnings
that topped Wall Street expectations. The company said its revenue grew 37% to $24.32 billion, beating market projections for $24.16 billion. per Reuters"We think demand will be good despite probably a contraction in the automotive market as a whole," Musk said on the call. recently in a bid to boost demand. It slashed prices across global markets, including a reduction of up to 20% for the Model Y SUV in the US.
Despite the earnings beat, Tesla's automotive gross margin declined to 25.9%, the lowest in five quarters. Musk said the dismal figures reflected increased costs, higher raw material and commodity prices. That shows the company is enduring an erosion of margins in order to prop up sales volumes, according to Dan Ives, an analyst with Wedbush Securities.
"They're ultimately needing to sacrifice margins for volume. And now the question is, with a price war happening in China, what does the trajectory look like in 2023," Ives told CNBC on Wednesday.
This is a bit Captain Obvious