Musk: Tesla Price Cuts Boost Sales Despite Weak Economy

Tesla is gearing up for a challenging 2023, after cutting prices to spur demand.

The electric car company, led by billionaire Elon Musk, reported record revenue and profits in the three months to December, beating expectations.

Mr Musk acknowledged "questions" about how the firm will be affected by higher borrowing costs and a weaker economy.

But he said the price cuts are working to bring in buyers, with orders this month so far outpacing production.

"Price really matters," he said. "We think demand will be good despite, probably, a contraction in the automotive market as a whole."

The update comes at a critical time for the company.

Sales of electric vehicles rose last year, bucking a wider decline in the global car market.

But Tesla's lead has been challenged by increased competition from traditional motor manufacturing giants such as Ford and General Motors, as well as newer entrants to the market like Rivian and Lucid in the US and China's BYD and Nio.

The price of the firm's shares tumbled by nearly two-thirds last year, amid concerns that the company was losing its edge, while Mr Musk was increasingly distracted by his $44bn purchase of Twitter.

Mr Musk, who has more than 127 million followers on the platform and frequently uses his position to weigh in on politically divisive issues, rejected suggestions that his outspoken social media presence was hurting the brand.

"My follower account speaks for itself," he said.

He added that he expected Tesla's share price to recover over the long-term, while warning that he anticipated a "pretty difficult recession" in 2023 that could lead to setbacks.

In the final months of 2022, revenue rose $24.3bn, up 37% compared with the same period in 2021, while profits jumped 59% to $3.7bn.

Executives said that in the months ahead Tesla would be focused on increasing production as quickly as possible, while bringing down costs.

They said they believed its operating margins would remain among the highest in the industry - though warned they would shrink because of the price cuts - and that its much-anticipated cyber-truck was on track to start production later this year.

Last year, Tesla delivered a record 1.3 million cars to customers last year, up 40% from the prior year.

But production was up 47%, raising concerns among investors about over-supply.

Amid the questions, Tesla announced a series of major price cuts in recent weeks, running as high as 20% on some models in the US.

"For the first time, I would say maybe ever, you know, there have been demand issues," said George Gianarikas, managing director of Cannacord Genuity.

"Now, we're waiting to see what the gross margin impact of that price reduction is, what the demand impact of that price reduction is, and how the company is kind of dedicated to sailing the turbulent seas that we've seen from a macroeconomic perspective."