Tesla’s profit slumped in the third quarter after the carmaker cut prices to maintain its dominance of the market for electric cars.
The company reported a net profit of $US1.9 billion from July through September, below Wall Street expectations. That was a 44 per cent drop from the $US3.3 billion Tesla made in the same three-month period a year earlier.The company has slashed prices by around 25 per cent in the United States during the last year, putting the priority on sales rather than profit.
Despite the cuts, Tesla’s share of the electric vehicle market in the United States slumped to 50 per cent in the third quarter from 60 per cent in the first quarter, according to Kelley Blue Book. BMW, Mercedes, Hyundai, General Motors and other automakers have been introducing new electric vehicles at a rapid clip, eroding Tesla’s dominance.
At least until recently, Tesla was more profitable than established US carmakers, allowing it to cut prices. “I view it as a way to defend market share at the expense of margin,” said Kevin Roberts, director of industry insights and analytics at CarGurus, an online auto sales site.The company may not be able to continue cutting prices indefinitely. Its net profit margin in the third quarter was 8 per cent, in line with that of traditional carmakers.
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