Despite price war, Tesla's profit margin for Q2 2023 rivals Porsche, cheaper Model 3 to go after BYD next

Tesla presented its much-anticipated Q2 2023 financial results yesterday. Investors have been waiting for the financial presentation because in the months prior, Tesla had started a price war on a scale that’s never seen in recent times.

As the Chinese economy slows, demand for EVs also took a hit but Tesla responded by slashing prices, forcing many EV players into a corner.

Thanks to its highly efficient Gigacasting production method, vertically integrated supply chain, and lean online-only sales network, Tesla has one of the highest profit margins in the industry, and it can sacrifice margins to boost volumes in ways no other car company can.

In the contest for profits per car, Tesla is emperor. Reuters estimates that Tesla made USD 15,653 per car in Q3 2022 - 2x more than VW AG (including Audi and Porsche), 3x more than BYD, 4x more than Toyota (including Hino, Daihatsu and Lexus).

Investors were concerned that the intense price war will hurt the company’s earnings but yesterday’s presentation to investors showed that its overall gross margin stood at 18.2 percent – it’s the company’s lowest in 16 quarters, down from last year’s 26 percent, but is still on par with Porsche’s numbers for Q1 2023.

Among traditional car companies, Porsche is the most profitable, and is due to publish its own Q2 earnings soon.

CEO Elon Musk warned that he is prepared to slash prices even further. Commenting on the state of the world’s economy, Musk said "One day it seems like the world economy is falling apart, next day it's fine. I don't know what the hell is going on."

"I think it does make sense to sacrifice margins in favor of making more vehicles," remarked Musk, who added that if macroeconomic conditions remain poor, Tesla would have to lower prices further.

Closer to home, Tesla made its official entry into Malaysia with the RM 199,000 Tesla Model Y. Prices start at RM 199,000 for the rear-wheel drive 347 PS / 420 Nm / 430 km range (WLTP) SUV.

Its next closes rival is the RM 168,430 all-wheel drive BYD Atto 3 Extended Range, which makes 204 PS / 310 Nm / 420 km (WLTP).

With a more headroom to slash prices than BYD, Musk's comments provided some hint that Tesla will be going after BYD next, after slashing higher range premium EV makers like Nio and XPeng into submission. It is always easier for a brand like Tesla, that is coming from a high price ground to charge downhill to conquer lower lying lands, than it is for an unknown upstart like BYD that started with cheaper EVs, to push uphill.

After the Atto 3, BYD is set to launch the Seal and Dolphin in Malaysia before the year ends. The former will be priced higher than the Atto 3, the latter lower.

Tesla will be following up on the Model Y's launch with a cheaper Model 3 next. No timeline for the launch has been given, but a registration of interest page has been up on Tesla Malaysia's website.