Tesla’s gross margins, once close to 30%, fell to just 16% in the last quarter. Gross margins in its core auto segment were down to just 12%, or far worse than South Korea’s Hyundai Motor Co, which has gross margins of 19%, Japan’s Toyota Motor Corp, with gross margins of 18%, and BMW, whose gross margins are around 17%. Until recently, Tesla’s strong gross margins were supported by the scale of its gigafactories, direct-to-consumer sales rather than dealerships that most other carmakers rely on, and minimal marketing costs. More recently, those advantages have been eroded by aggressive price cuts, rising competition from Chinese makers such as BYD Co overseas, Hyundai and Volkswagen EVs in the US, and shifting demand.
A week before last Christmas, or just a month after Donald Trump won the US presidential elections, shares in electric vehicle (EV) pioneer Tesla Inc, run by one of his most vocal supporters, Elon Musk, touched an all-time high of US$488 ($639). That valued Tesla at over US$1.5 trillion, or more than the combined value of all the other auto manufacturers on earth, as well as all their suppliers and component makers. Embedded in that valuation was not only the world’s most famous EV maker but the man who leads the company and almost single-handedly put Trump back in the White House with US$290 million in donations to his campaign.
In the aftermath of Trump’s attempts to remake the global trading system with high tariff walls, Tesla shares fell to US$220 last month, down 54% from their peak four months ago. They have rebounded a bit but are still down 42% since the week before Christmas. On April 23, Tesla reported earnings for the first quarter. Car deliveries globally were down 13% over the past 12 months at a time when global EV sales actually grew 20%. Tesla sales in Europe were down an annualised 40%, while EV sales fell 21% in the quarter globally. Net income was down 71% during the period.
