From Torque News.
Tesla CEO Elon Musk said during the company’s Q2 2023 Earnings Call on Wednesday that it “makes sense to sacrifice margins in favor of making more vehicles,” hinting toward more price cuts even as economic times are uncertain.
On the one hand, Musk is saying that it makes sense to sacrifice profits in order to make more vehicles. This is a paradox because, in general, companies are motivated to make profits. Sacrificing profits would seem to be counterproductive.
On the other hand, Musk may be betting that by making more vehicles, Tesla will be able to capture a larger share of the electric vehicle market. This would lead to increased profits in the long run.
Here are 4 questions about this paradox and the answers based on what media has covered on those topics:
Why is Tesla willing to sacrifice margins?
Tesla is willing to sacrifice margins because it believes that it can make up for the lost profits in the long run by capturing a larger share of the electric vehicle market. Tesla is also hoping to increase demand for its vehicles by making them more affordable.
Is this a risky strategy?
Yes, this is a risky strategy. If Tesla is unable to capture a larger share of the market, it could end up losing money. However, Musk is confident that Tesla’s products are superior to those of its competitors, and he believes that the company will be successful in the long run.
What do other companies do in this situation?
Other companies in the automotive industry typically try to maximize profits. They do this by charging high prices for their vehicles and by cutting costs wherever possible. However, Tesla is taking a different approach. It is willing to sacrifice profits in order to make its vehicles more affordable and to capture a larger share of the market.
What does this mean for the future of Tesla?
Elon Musk is convinced that Tesla is very near Robotaxi level FSD. When it achieves that it will have millions of vehicles with HW3 or better ready to run the software they download OTA and become robotaxis.
00:1.04 Tesla’s Risky Strategy: Sacrificing Margins to Capture the EV Market
1:05 Why is Tesla willing to sacrifice margins?
1:30 Is sacrificing margins to build more cars a risky Strategy for Tesla?
1:50 What do other carmakers do when Tesla further drops prices?
#elonmusk #tesla
This is Armen Hareyan from Torque News. Please follow us at https://twitter.com/torquenewsauto on Twitter and https://www.torquenews.com/ for daily automotive news.
Reference
Teslarati https://www.teslarati.com/tesla-risky-margin-sacrifice-makes-sense-up-production-elon-musk/
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