Tesla Inc. shares fell in late trading after the carmaker warned of more hits to its already-shrinking profit margins.
Elon Musk said the company probably will keep lowering the prices of its electric vehicles if interest rates continue to rise. Months of markdowns have already taken a toll on Tesla’s gross margin, which fell to 18.2% in the second quarter, a three-year low.
Tesla is also pouring money into other investments, including its newest model, the Cybertruck, and Dojo, an in-house supercomputer that Musk said the company will spend at least $1 billion on by the end of next year.
And while Tesla remains on track to produce around 1.8 million vehicles in 2023, output will dip this quarter due to factory upgrades.
The CEO characterized the smaller profits as speed bumps in a broader growth story, and claimed Tesla could one day be 10 times its current size. Investors still reacted negatively, with the stock falling 4% at 7:45 p.m. Wednesday in New York, after more than doubling so far this year
“It does make sense to sacrifice margins in favor of making more vehicles because we think in the not-too-distant future they will have a dramatic valuation increase,” Musk said.
The carmaker’s profit, excluding some items, came to 91 cents a share, more than the 81 cents that analysts estimated. Revenue rose 47% to $24.9 billion, better than consensus expectations for $24.5 billion.