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A 15% price cut needs +130% volume to break even

In 2023 Tesla cut revenue per car by 15%, from $53.1k to $45.2k. At a 26% gross margin the textbook break-even needs +130% sales volume: every dollar of price given away has to be earned back on many more cars.
Tesla sold +37% more, so gross profit should have fallen 40%. It fell 24%: cost per car dropped 4%, mainly through sales mix according to the 10-K.
A discount is a bet on volume. Here the bet fell short and cheaper cars limited the damage.
1A 15% price cut breaks evenonly with +130% volume+130%volume needed to keepgross profit flat2Tesla sold +37%: gross profitshould have fallen 40%+37%−40%cost per car as in 2022(our calculation)3Cheaper cars gave back 16points: profit fell 24%−24%+16 ptscost per car −4%, mainlysales mix (10-K)A discount is a bet on volume: −5% needs +24%, −10% +62%, −15% +130%.
Sources: Tesla Form 10-K FY2022, FY2023; Tesla Q4 2023 Update; IEA; Rho Motion.
Notes: Gross profit on car sales, $; gross margin fell from 26% to 17% of revenue. Per car = automotive sales revenue and cost ÷ new-vehicle deliveries excl. operating leases. Gross margin stands in for contribution margin. Break-even volume = price cut ÷ (margin − price cut). The −40% is our calculation: Tesla volume and price, cost per car as in 2022.
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