In recent months, Tesla has been shaking up the entire auto industry even more than it already was. All thanks to the drop in prices of their models that are upsetting the large groups that see much less competitive proposals are placed above the price of those of the American manufacturer. But this seems to be only the beginning and according to Elon Musk, they have plenty of room to continue lowering the price if necessary.
During the presentation of the first quarter results, in addition to indicating that they have achieved revenues of 23.3 billion dollars, 24.2% more than the previous year, the company also reported that they had achieved a gross margin of 19.3%. A figure below what was achieved in previous quarters, but that Elon Musk has indicated that it gives them room for further decreases in rates if necessary.
The goal is to increase sales volume as quickly as possible. According to Musk, this year they expect to be able to exceed the goal of 1.8 million units and reach 2 million this 2023.
Volume is precisely one of the keys to the future for Tesla, which does not look so obsessively at sales margin. And it is that during the meeting with the shareholders, Musk and the economic team answered the questions of the investors and where on the one hand the financial director of Tesla, Zachary Kirkhorn, did not insist on the objective of maintaining this profit above 20%while Musk even explained that, in theory, Tesla can sell its cars without making a profit on each delivery.
This is due to the determined commitment from the beginning of Tesla by software. While the rest of the manufacturers left this critical section in the hands of third-party companies, an alternative that has proven to be an error and that now means having to invest billions in a hurry, Tesla bet everything on its own native design for its vehicles, and where the Autonomous driving has been one of the main keys.
For example, we can see how in a Tesla Model 3 Standard, with a price in the United States of $39,990, a 19% profit margin is about $7,600 per unit. But activating the full autonomous driving system has a cost of $15,000. Almost double.
A software that also has the possibility of license and sell to other companies They haven’t developed their system.
But to get customers to broadly opt for this system, Tesla needs two things. One is to lower the price of the vehicle, which is already being achieved, and another is to make technology live up to the timeless promises of truly autonomous driving.
An aspect that Elon Musk has returned, once again, to indicate that it will be achieved this year. A new prediction that this time has the endorsement of the deployment since last year in the beta phase of the FSD system in the United States and Canada. A first step that has been spreading and opening, and that should soon reach Europe.
We cannot also forget that with a greater number of cars on the road, Tesla can get more out of its ecosystem, for example the network of Superchargers, which has recently been opened to other brands but has a significant number of customers for Tesla models. And again, volume is key to making the network profitable, which could even open up to agreements with third-party companies to achieve more competitive rates in exchange for investment.
A drop in prices that also has an impact on the impact it will have on some car groups that will not be able to keep up with Tesla’s price cutswhich could give the finishing touch in 2024 with the arrival of its cheapest proposal.