Tesla earnings drop 20% but Elon Musk to put sales ahead of profit

Stock tanks 8%; operating margin shrinks to 11.4%, a roughly two-year low, after several price cuts

Tesla’s shares sank more than 8 per cent on Thursday and dragged down other automakers after Chief Executive Elon Musk signalled the electric-vehicle maker will keep cutting prices to drum up demand even after taking a big hit to margins.  The firm’s net income came in at $2.51 billion, down 24 per cent from last year, while GAAP (Generally Accepted Accounting Principles) earnings came in at 73 cents, down 23 per cent from the year-ago quarter.
 

Musk argued that Tesla could financially withstand price cuts, giving it the upper hand against rivals. “We’ve taken a view that pushing for higher volumes and a larger fleet is the right choice here versus a lower volume and higher margin,” Musk told analysts. 
 

The stock was trading at $167, with at least 15 analysts lowering their price targets on Tesla. The company was set to lose around $50 billion in market value, if losses hold.
 

Tesla’s operating margin shrank to 11.4 per cent in the first quarter, a roughly two-year low, after the company kicked off a price war in January to defend its dominance in the US and make inroads in China, its second-largest market. Musk suggested more such moves ahead, saying the company will put sales growth ahead of profit in a weak economy.