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Published date: June 21, 2024

Elon’s EV Margin “Crystal Ball”

Elon’s EV Margin “Crystal Ball”

“If the interest rates come down quickly, I think margins will be good. And if they don't come down quickly, they won't be that good.” - Elon Musk when asked about Tesla’s gross margins. Are we seeing margin erosion by self-cannibalization? Let’s take a closer look.

Table of contents

Tesla’s margin dilemma

“Margin erosion by self-cannibalization” might be what we are seeing on this chart. Instead of delivering more value to consumers, Tesla has continuously cut prices, leading to lower margins.

On the last earnings call, Elon was asked about the future…

Martin Viecha: The next question is, what is your expectation for automotive gross margin ex-regulatory credits for the full year?

Elon Musk: “We don't know. We don't have a crystal ball, so it's difficult for us to predict this with precision. If the interest rates come down quickly, I think margins will be good. And if they don't come down quickly, they won't be that good. Yeah. It's always important to remember that the vast majority of people buying a car is about the monthly payment. It's not that people don't want. We have tons of -- we have lots of people who want to buy our car but simply cannot afford it. And as interest rates drop and that monthly payment drops, then they're able to afford it and they buy the car. It's pretty straightforward and there are no tricks to get around this.”

Tesla and their monthly payment magic 🔮

Maybe Elon doesn’t have a crystal ball, but Tesla seems to be adding some magic to their prices.

Masked by the inclusion of federal and state incentives, as well as gas savings, Tesla’s real prices look pretty nice to the average EV shopper. Take a closer look below.

Federal and state tax incentives in Tesla’s prices
Gas savings in Tesla’s prices

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