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By Yasin Ebrahim

Investing.com — Tesla reported Wednesday first-quarter earnings that just missed Wall Street estimates as margins were hurt by price cuts.

Tesla Inc (NASDAQ:TSLA) fell 2% in after-hours trading following the news.

Tesla announced earnings per share of 85 cents on revenue of $23.30 billion. Analysts polled by Investing.com anticipated EPS of $0.86 cents on revenue of $23.78B.

Gross margins, which have been closely watched after Tesla cut the prices of its EVs several times, fell to 19.3% from 29.1% in the same period last year, missing estimates of 21%.

Tesla cut prices worldwide on its EVs including in the U.S. where it recently cut prices for sixth time this year amid rising competition.   

“Although we implemented price reductions on many vehicle models across regions in the first quarter, our operating margins reduced at a manageable rate,” the company said, adding that further cost cuts were likely.

“We expect ongoing cost reduction of our vehicles, including improved production efficiency at our newest factories and lower logistics costs, and remain focused on operating leverage as we scale,” it added.

The hit to margins dealt a severe blow to free cash flow, which fell 80% year-on-year to 441 million.   

Looking ahead, Tesla said it still sees full-year production of 1.80 million, compared with analyst estimates for 1.84M.

“For 2023, we expect to remain ahead of the long-term 50% CAGR with around 1.8 million cars for the year,” the company said.

Tesla also said that its Cybertruck remains on track to begin production later this year.