As the electric vehicle manufacturer lowered prices to entice more customers in the face of increased competition and a sluggish economy, Tesla Inc.’s first-quarter margins are likely to have fallen to a level not seen in more than three years.

The most valuable automaker in the world, which controls more than half of the U.S. EV market, reduced sticker prices on its vehicles five times between January and April, which increased quarterly sales in the quarter ended March 31 but decreased its top profit margin in the industry.

According to 17 analysts surveyed by Visible Alpha, Tesla is anticipated to announce vehicle gross margin of 23.2% for the quarter on Wednesday, down from a record 32.9% a year earlier and the lowest since the fourth quarter of 2019.

In January, Tesla’s finance head Zachary Kirkhorn made a commitment that the company will maintain margins of 20% and an average selling price of $47,000 for all models. However, analysts anticipate more price cuts and margin pressure.

“While many investors have been hopeful that Q1 margins might be (at their) bottom, we don’t believe that will necessarily be the case, particularly given our expectation that further cuts are likely,” Bernstein analysts said in a note.

On Friday, the business lowered rates in Singapore, Singapore, and Europe. Since the beginning of the year, Tesla has decreased the cost of its base Model 3 by a total of 11% in the United States, and its base Model Y has seen a 20% decrease.

It has faced pressure as domestic competitors like Ford Motor Co have increased competition, even as customers cut back on spending due to recession concerns, and as it tries to catch up to BYD in China, its second-largest market.

According to internet posts and workers, Tesla’s Shanghai manufacturing experienced issues on Monday after employees were notified of the company’s plans to reduce their performance bonuses, which are based on the operation of the production.

A production increase at its factories in Austin, Texas and Berlin, according to the business, run by billionaire Elon Musk, will assist to increase profits because of economies of scale.

Tesla is also probably going to profit from a drop in lithium prices this year, particularly in China, where a drop in EV demand has led to stockpiles of the metal.

“It’s probable that Tesla’s margins will be preserved based on the reduction in commodity costs,” said George Gianarikas, analyst at Canaccord Genuity.

Tesla is aiming to deliver 1.8 million cars this year, but Musk stated in January that if conditions are right, the company may deliver 2 million cars.

The company’s stock has increased by nearly 50% so far this year. Last year, they lost 65% of their worth.

(Adapted from EconomicTimes.com)