Tesla posted a modest profit increase for the second quarter amid a more competitive market for electric vehicles than the Elon Musk-led company is accustomed to.
Tesla’s profits from April through June amounted to $2.7 billion, compared to $2.5 billion in the first quarter of this year and $2.3 billion in the second quarter of 2022. Sales increased by 7 percent, to $25 billion, from the previous quarter.
Tesla said lower average selling prices, as well as the cost of adding a new pickup truck, hit earnings.
An escalating price war is making electric cars more affordable, but it’s putting pressure on profits across the industry. Wait times for car deliveries have evaporated, and dealers who sold mega-brand cars a year ago are offering thousands of dollars in discounts.
Tesla is one of the few companies making money from electric cars, and it dominates the electric vehicle markets in the US and Europe. As a result, the company is in a stronger position than other automakers losing billions of dollars on electric vehicles.
But Tesla had to cut prices sharply to attract buyers and defend its market share. The company accounted for 59 percent of electric vehicles sold in the United States in the second quarter, down from 65 percent a year earlier, according to Kelley Blue Book.
Next year could determine whether Tesla retains its dominance. The company said last week that it has begun production of the Cybertruck, a futuristic-looking pickup truck that will go on sale by the end of the year, ushering in one of the most popular and lucrative segments of the US auto market. The Cybertruck will be Tesla’s first new passenger model since the Model Y went on sale in 2020.
Unlike the Model Y, the SUV that had little competition when it went on sale, the Cybertruck is entering a crowded field. Ford Motor Company offers an electric pickup, the F-150 Lightning, as does Rivian, a recent automaker that sells an electric pickup called the R1T. General Motors will soon start selling an electric version of its Chevrolet Silverado pickup truck.
In a sign of stiff competition, Ford said Monday it will cut the price of the Lightning by up to $10,000.
Ford said the price cuts were possible because it beefed up assembly lines to produce more trucks, and because of lower prices for battery raw materials. But analysts said the cuts reflected a glut of electric vehicles. Ford may also try to grab market share before the electric Cybertruck and Silverado become available in large numbers.
Rivian has also become a more powerful competitor after overcoming production problems. Its small R1T outsold the F-150 electric car in the first six months of the year.
Rivian CEO RJ Scaringe admitted in an interview last month that creating a seamless production process was “very difficult.” But, he added, “we’ve kind of passed that point of peak pain and we’re now in that kind of a more predictable downhill phase.”
In Europe, Tesla is approaching well-known automakers such as Fiat as it ramps up production at a factory near Berlin and plans a major expansion of that factory. But Tesla also faces growing competition in Europe from Chinese automakers such as BYD and SAIC, which sell electric cars using the MG brand. In China, Tesla has had to lower prices to withstand competition from local automakers with newer models.
And all automakers are dealing with rising interest rates, which increases monthly loan payments for car buyers. Some banks are no longer willing to lend to borrowers with weaker credit histories.
Tesla also sells solar panels and batteries for home and grid energy storage. The company’s fans often cite these companies as underappreciated sources of future growth.