Tesla's Net Revenue Drops 44%.

Hey!

Forgive me for taking a victory lap this morning, but Tesla’s earnings came in yesterday and I can’t say anything, but I told you so.

I have a long running aversion to discounts because discounts:

• Destroy brand equity

• Eat into your profit margins

• Teach your customers a bad lesson like they should wait

• Harm long term demand

I can go on.

Let’s look at the results from Tesla’s 3rd quarter earnings call:

• Net revenue down 44%

• Operating margin drops from 17.2% to 7.6%

• Gross margin falls from 26.8% to 16.3%

All of these numbers are heading in the wrong direction as any competent marketer would have known from the start.

What analysts were saying is that Tesla’s reliance on price promotions and price cuts was to blame.

Prices for some Tesla’s are a third lower than they were at this time a year ago.

Three things to pay attention to heading into the 4th quarter:

• Car deliveries. Tesla still estimates 1.8M cars delivered this year.

• Cybertruck deliveries. The Cybertruck has been on the menu for the start of deliveries for a while now, but it still hasn’t hit the road.

• The price war in China. The Chinese market is still growing but slower than previous years and Chinese consumers are looking for cheaper options in many cases. There’s also the reality that Chinese price wars are fought on an even tougher territory than a price war in Western Countries.

Did you think that Tesla was actually going to defy “The Doom Loop of Discounts”?

Let me know in the new DW strategy Slack channel or by hitting reply!

This also begs the question: Will Tesla and Elon Musk change their thinking on traditional advertising? (I mean, Elon did buy an advertising based business in Twitter…after all!)

Do you know someone that has been talking about Tesla and their demand issues? Share this newsletter with them!