Tesla Q1 profit drops 24% due to price cuts

Elon Musk’s Tesla reported a 24% drop in first-quarter profit and missed market estimates for total gross margin on Wednesday, throttled by a series of aggressive price cuts meant to spur demand in a sagging economy and fend off rising competition.

Elon Musk-led Tesla reported a total gross margin of 19.3%, compared with expectations of 22.4%, according to analysts polled by Refinitiv.

The electric-vehicle maker lowered sticker prices four times in the United States between January and March, sacrificing its industry-leading margin to maintain its dominance in the US and catch up with rival BYD in China – its second-largest market.

But a murky economic outlook meant that Musk’s plan to ride out a recession with price cuts and lower production costs was not enough to make up for strained consumer spending on big-ticket items. Tesla deliveries in the first quarter rose 4.3% from the fourth quarter.

The company reported first-quarter revenue of $23.33 billion, compared with the consensus estimate of $23.21 billion, according to 22 analysts polled by Refinitiv.

First-quarter profit was $2.51 billion, compared with $3.32 billion a year earlier.

Shares were down 2% in after-hours trading.