# Musk says Tesla price cuts triggered demand, 2023 sales could hit 2 million vehicles
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-01-26
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Tesla's Aggressive Price Cuts Ignite Demand for
Meta Description: Elon Musk reassures investors as Tesla beats Q4 revenue targets despite declining margins, anticipates 37% rise in car volume amid recession concerns.
URL: https://financedigest.com/musk-says-tesla-price-cuts-triggered-demand-2023-sales-could-hit-2-million-vehicleshtml

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By Hyunjoo Jin and Akash Sriram

(Reuters) – Tesla Inc’s aggressive price cuts have ignited demand for its electric vehicles, Chief Executive Elon Musk said on Wednesday, playing down concerns that a weak economy would throttle buyers’ interest.

The company slightly beat Wall Street targets for fourth-quarter revenue and profit earlier on Wednesday despite a sharp decline in vehicle profit margins, and it sought to reassure investors that it can cut costs to cope with recession and as competition intensifies in the year ahead.

Deep price [cuts this month have positioned Tesla](https://www.financedigest.com/tesla-expands-discounts-with-price-cuts-in-europe-singapore-israel.html "Tesla expands discounts with price cuts in Europe, Singapore, Israel") as the initiator of a price war, but its forecast of a 37% rise in car volume for the year, to 1.8 million vehicles, was down from 2022’s pace.

Tesla’s sales prospects, as it confronts a weaker economy, are a key focus for investors. The company said it maintains a long-term target of a compounded 50% annual [rise in sales](https://www.financedigest.com/mercedes-posts-rise-in-q1-sales-boosted-by-evs-premium-cars.html "Mercedes posts rise in Q1 sales boosted by EVs, premium cars").

Musk addressed the issue at the start of a call with investors and analysts.

These [price changes](https://www.financedigest.com/explainer-oil-price-surge-changes-ecb-narrative-only-at-the-margins.html "Explainer-Oil price surge changes ECB narrative only at the margins") really make a difference for the average consumer,” he said, adding that vehicle orders were roughly double production in January, leading the automaker to make small price increases for the Model Y SUV.

Musk, who has missed his own ambitious [sales targets for Tesla in recent years](https://www.financedigest.com/home-battery-sales-in-germany-may-surge-59-this-year-study.html "Home battery sales in Germany may surge 59% this year -study"), said that deliveries in 2023 could hit 2 million vehicles, absent external disruption.

There’s going to be bumps along the way and we’ll probably have a pretty difficult [recession this year,”](https://www.financedigest.com/uk-to-avoid-recession-this-year-but-outlook-still-weak-bcc-says.html "UK to avoid recession this year but outlook still weak, BCC says") he said. We think demand will be good [despite probably a contraction](https://www.financedigest.com/asias-factory-activity-contracts-despite-chinas-covid-reopening.html "Asia’s factory activity contracts despite China’s COVID reopening") in the automotive market as a whole.

[Shares rose 5.3% in extended trading](https://www.financedigest.com/social-trading-is-the-new-way-that-gen-z-are-getting-their-share-of-the-pie.html "Social Trading is The New Way That Gen Z Are Getting Their Share of The Pie").

The company is relying on older products and Musk said its Cybertruck, its [next new electric pickup truck, would not begin volume production until next year](https://www.financedigest.com/novartis-to-spin-off-generics-business-sandoz-next-year.html "Novartis to spin off generics business Sandoz next year"). [Reuters in November reported that the highly expected model will not be produced in volume until late this year](https://www.financedigest.com/germany-home-prices-to-sink-nearly-6-this-year-reuters-poll.html "Germany home prices to sink nearly 6% this year – Reuters Poll").

Tesla will detail plans for a “next-generation [vehicle platform” at its investor](https://www.financedigest.com/investors-go-back-to-basics-with-simpler-self-driving-vehicles.html "Investors go back to basics with simpler self-driving vehicles") day in March.

Tesla said that its automotive [profit margins](https://www.financedigest.com/inflation-boosts-jeronimo-martins-q4-profit-but-dents-margins.html "Inflation boosts Jeronimo Martins’ Q4 profit but dents margins"), which dropped to a two-year low of 25.9% in the reported quarter, would be above 20%, pressured by costs of ramping up battery production and new factories in Berlin and Texas, as well as higher raw material, commodity, logistics and warranty costs.

GRAPHIC – Tesla expects to deliver 1.8 [million vehicles](https://www.financedigest.com/sainsburys-pays-524-million-for-full-ownership-of-store-investment-vehicles.html "Sainsbury’s pays 4 million for full ownership of store investment vehicles") this year

https://www.reuters.com/graphics/TESLA-RESULTS/jnpwywnbrpw/chart.png

![](https://onlineworldnews.com/wp-content/uploads/2023/01/12.jpg)

GRAPHIC – Tesla’s [profit growth](https://www.financedigest.com/contract-caterer-compass-expects-2023-profit-growth-to-top-20.html "Contract caterer Compass expects 2023 profit growth to top 20%") fell in the fourth quarter

https://www.reuters.com/graphics/TESLA-RESULTS/gkvlwxoqlpb/chart\_eikon.jpg

![](https://onlineworldnews.com/wp-content/uploads/2023/01/13.jpg)

Analysts said Tesla’s goal is bullish given the macroeconomic uncertainties.

I think that you’re going to [see some severe demand destruction across consumer](https://www.financedigest.com/britains-next-sees-lower-profit-in-2023-as-consumer-outlook-darkens.html "Britain’s Next sees lower profit in 2023 as consumer outlook darkens") spending and I think cars are going to take a big hit,” Edward Moya, senior market analyst at OANDA, said.

[Tesla said it does not expect meaningful volume growth in the near term from China](https://www.financedigest.com/us-house-committee-chair-concerned-by-tesla-deals-in-china.html "US House committee chair ‘concerned’ by Tesla deals in China"), since its Shanghai factory was running near full capacity, rebounding from production challenges earlier this year.

Even a small cooling of demand will have significant implications for the [bottom line,”](https://www.financedigest.com/the-severe-impact-of-downtime-on-companies-bottom-lines.html "The severe impact of downtime on companies’ bottom lines") said Sophie Lund-Yates, an analyst at Hargreaves Lansdown.

Margins generally are expected to be under further pressure from its aggressive [price cuts](https://www.financedigest.com/tesla-cuts-u-s-model-s-and-model-x-prices-between-4-and-9.html "Tesla cuts U.S. Model S and Model X prices between 4% and 9%"). Tesla, which had made a series of price increases [since early](https://www.financedigest.com/first-quarter-dash-for-cash-largest-since-early-2020-bofa.html "First quarter ‘dash for cash’ largest since early 2020 -BofA") 2021, reversed course and offered discounts in December in the United States, followed by price cuts of as much as 20% this month.

Analysts had said [Tesla’s profitability gave it room to cut prices](https://www.financedigest.com/tesla-posts-record-quarterly-deliveries-after-price-cuts-up-4-from-q4.html "Tesla posts record quarterly deliveries after price cuts, up 4% from Q4") and pressure rivals. The company’s $9,000 in net profit per vehicle in the past quarter was more than seven times the comparable figure for Toyota Motor Corp in the [third](https://www.financedigest.com/greek-residential-property-price-recovery-picks-up-in-third-quarter.html "Greek residential property price recovery picks up in third quarter") quarter. But it was down from almost $9,700 in the third quarter.

The company’s stock [posted its worst drop](https://www.financedigest.com/ford-posts-lower-profit-issues-downbeat-outlook-shares-drop.html "Ford posts lower profit, issues downbeat outlook; shares drop") last year, hit by demand worries and Musk’s acquisition of Twitter, which fueled investor concerns he would be distracted from running Tesla.

[Musk dismissed surveys that suggest his political comments on Twitter](https://www.financedigest.com/elon-musk-plans-to-cut-half-of-twitter-jobs-bloomberg-news.html "Elon Musk plans to cut half of Twitter jobs – Bloomberg News") are damaging the Tesla brand. I might not be popular” with some, he said, “but for the vast majority of people, my follow count speaks for itself.” He has 127 [million](https://www.financedigest.com/10-million-to-be-whipped-into-ice-cream-brand-four-winters-following-acquisition.html " Million To Be Whipped Into Ice Cream Brand Four Winters Following Acquisition ") followers.

The company said revenue was $24.32 billion for the three [months ended Dec](https://www.financedigest.com/spanish-manufacturing-output-down-for-6th-straight-month-in-dec-pmi.html "Spanish manufacturing output down for 6th straight month in Dec -PMI"). 31, compared with analysts’ average [estimate of $24.16 billion](https://www.financedigest.com/electric-kick-scooter-market-is-projected-to-reach-6-5-billion-by-2031-and-estimated-to-grow-at-11-5-cagr-between-2021-and-2031.html "Electric Kick Scooter Market is Projected to Reach .5 billion by 2031, And estimated to grow at 11.5% CAGR between 2021 and 2031"), according to IBES data from Refinitiv.

Tesla’s full-year earnings were bolstered by $1.78 billion in regulatory credits, up 21% from a year earlier.

Net [profit for the quarter was $3.69 billion](https://www.financedigest.com/softbanks-vision-fund-posts-2-billion-profit-share-weakness-casts-shadow.html "SoftBank’s Vision Fund posts  billion profit, share weakness casts shadow"), or $1.07 per share, compared with $2.32 billion, or 68 cents per share, a year earlier. Adjusted earnings per share of $1.19 topped the [Wall Street](https://www.financedigest.com/asian-stocks-edge-up-before-u-s-jobs-data-defying-wall-street-selloff.html "Asian stocks edge up before U.S. jobs data, defying Wall Street selloff") analyst average of $1.13.

It [ended the fourth quarter with 13 days’](https://www.financedigest.com/amazon-to-lay-off-staff-in-u-s-canada-and-costa-rica-by-end-of-day.html "Amazon to lay off staff in U.S., Canada and Costa Rica by end of day") worth of vehicles in inventory, more than four times higher than the start of 2022, and a record $12.8 billion in value.

(Reporting by Hyunjoo Jin in San Francisco and Akash Sriram in Bengaluru, Additinoal reporting by Joe White and Ben Klayman in Detroit and Kevin Krolicki in Singapore; Writing by Peter Henderson; Editing by Sriraj Kalluvila and Matthew Lewis)


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