Tesla Margins Decline amid Rising Competition in EV Segment
Tesla reported loss of $2.04 per share in second quarter earnings announced in August but market analysts are worried about the company reporting even worse numbers in third quarter. Tesla has made a forecast of drop in gross margins from 25 percent to 20 percent in third quarter. Considering growing competition, Tesla even announced massive discount for its expensive models. This would put further pressure on margins.
During second quarter, Tesla reported slightly better results as the company booked $100 million in ZEV credit sales. The company also booked $60 million in SolarCity minorities. The numbers reduced Tesla’s second quarter loss by nearly $165 million. The stock still performed better as investors are confident about stronger sales number for Model 3.
However, many market analysts have started talking about Tesla losing ground to Chevrolet Bolt EV. Additionally, the stronger sales for Model 3 in the coming quarters could mean lower sales for high-end models of Tesla. Tesla has offered value for money in Model 3 and one major drawback for Model 3 is the paid access to superchargers.
Tesla stock touched a yearly high of $385 on September 18. Compared to low of $181 in December 2016, investors have offered much better valuations to Tesla Motors. During the quarter, Tesla aims to deliver 1,500 Model 3. The production and sales for Model 3 is expected to go in full swing for Q4. The company will have to perform in terms of sales data and margins in order to keep the stock valuation strong in the coming quarters. Considering the rising competition, the improvement in margins is highly unlikely.
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