Rival automakers making EVs undercutting Tesla Inc.’s TSLA offerings while also incurring significant losses is a problem, admitted the company’s CEO Elon Musk.
What Happened: “Other companies dumping EVs at massive negative gross margin is a problem, but not one that will last,” Musk said.
Musk was referring to companies that discount their EVs to a point below Tesla in a bid to increase sales while also accumulating significant losses.
For instance, Ford sold 23,957 EVs in the U.S. in the second quarter, making it the second best-selling EV brand after Tesla. Its 2024 model year Mustang Mach-E SUV starts at $39,995 and is directly up against Tesla’s Model Y which starts a $44,990.
Ford's EV segment, called “Model e,” subsequently recorded an EBIT loss of $1.14 billion in the second quarter and a negative EBIT margin of 99.5%. For the whole year, Ford expects to incur a loss of $5 billion to $5.5 billion within the EV segment.
Why It Matters: Musk addressed the lower-priced rival EV offerings in the company’s second-quarter earnings call last month as well.
After large adoption and acceleration of EVs, the market witnessed “a bit of a hangover” as rivals struggled to make compelling EVs, Musk then said.
“So there have been quite a few competing electric vehicles that have entered the market and mostly, they have not done well, but they have discounted their EVs quite substantially, which has made it more a bit difficult for Tesla,” Musk said. “We don’t see this as a long-term issue, but really as fairly short term.”
Tesla delivered 443,956 EVs globally in the second quarter, marking a nearly 4.8% drop from the corresponding period last year.
The company said last month that it plans to start producing new vehicles, including more affordable ones, starting in the first half of 2025. Currently, Tesla’s cheapest offering is the Model 3 sedan which starts at $38,990.
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