UK Markets closed
  • FTSE 100

    -94.15 (-1.26%)
  • FTSE 250

    -236.13 (-1.26%)
  • AIM

    -7.02 (-0.87%)

    +0.0026 (+0.22%)

    -0.0057 (-0.4624%)

    -41.37 (-0.18%)
  • CMC Crypto 200

    -21.06 (-3.41%)
  • S&P 500

    +22.27 (+0.56%)
  • DOW

    +132.28 (+0.41%)

    -0.76 (-1.09%)

    -14.90 (-0.75%)
  • NIKKEI 225

    -34.36 (-0.13%)

    -133.96 (-0.67%)
  • DAX

    -253.16 (-1.66%)
  • CAC 40

    -124.15 (-1.74%)

Elon Musk vows to speed up Tesla cost-cutting as he warns of ‘pretty difficult’ recession

Elon Musk Tesla - REUTERS/Aly Song/File Photo
Elon Musk Tesla - REUTERS/Aly Song/File Photo

Elon Musk has vowed to step up cost-cutting at Tesla as the electric car maker warned of a slowing economy and rising interest rates.

Tesla said it would “accelerate our cost reduction roadmap” amid “questions about the impact of an uncertain macroeconomic environment”.

Mr Musk added that he expected a “pretty difficult recession” this year.

However, the US manufacturer vowed to ramp up production rates despite growing investor concern that demand for its vehicles is waning. Tesla has been cutting thousands from the asking price for its vehicles around the world in recent months.

Tesla delivered 1.31m cars last year, an increase of roughly 40pc, but short of a self-imposed target of growing vehicle deliveries by 50pc in 2022.

Despite record delivery numbers in the three months ending in December, when the 405,000 Tesla cars were shipped, the sale figures fell short of Wall Street expectations.

The company said it plans to grow production “as quickly as possible”, shrugging off fears of a slowdown in demand and concerns that Mr Musk has been increasingly distracted by his $44bn takeover of Twitter.

In his first results call since the takeover, Mr Musk insisted that demand was strong.

“Thus far we’ve seen the strongest orders year to date than ever in our history,” he said, adding that the company was receiving orders that were almost twice the rate of production.

Tesla has tried to lure new buyers by offering steep discounts on its current range, lopping around £5,500 off the cost of a new Model 3 in its latest round of price cuts.

Earlier this month, Tesla owners in China gathered at the car maker’s showrooms and delivery centres to protest against the price cuts amid worries their own vehicles have now lost value.

The electric carmaker has also been grappling with slowing demand in China as fast-growing domestic rivals unseat Mr Musk’s company from its once dominant position in the market.

Local rival BYD overtook Tesla as the world’s largest producer of electric vehicles last summer. The carmaker’s deliveries in China fell to around 55,000 in December, its lowest in five months, according to official data.

Rising energy bills and falling petrol prices have also been putting some consumers off from upgrading to an electric vehicle as their running costs rise.

Despite the challenges, Tesla beat expectations to post a record net profit of $3.7bn in the fourth quarter, up 59pc on the previous year. Revenue for the period was $24.3bn.

The company’s automotive gross profit margin fell from 30.6pc in the fourth quarter of 2021 to 25.9pc in the same period in 2022.

However, Tesla insisted additional software-related profits would keep its margins higher than other car makers.

Meanwhile, Tesla’s brand reputation has been flagging, in particular among younger, liberal car buyers, who have grown disillusioned with Mr Musk’s attacks on what he views as woke politics in the US.

But the billionaire dismissed concerns about brand damage, saying his 127m Twitter followers suggested he was “reasonably popular”.

Investors have grown increasingly restless as Tesla’s share price flags. Its shares fell by roughly 65pc last year amid a sell-off in highly-valued tech stocks.

This week, Mr Musk has been in court defending himself against a shareholder lawsuit which accused him of misleading investors when he claimed in 2018 he had “funding secured” to take Tesla private at a share price of $420.

Mr Musk said he believed he had commitments from Saudi investors to help him take the company off public markets. He told a court in California: “I had no ill motive. My intent was to do the right thing by shareholders.”