Tesla Inc. has been cutting prices this year to bolster sales of its aging EVs, but that has also likely reduced its industry-leading profit margins. That volume-over-profit approach will be the major focus of its first-quarter earnings report Wednesday.

The EV maker likely sold 161,630 vehicles in the U.S. in the January-March period, according to Cox Automotive, which represents a 25 percent increase compared with a year earlier but far below CEO Elon Musk’s 50 percent global growth target.

Tesla doesn’t break out U.S. sales but reported global deliveries of 422,875 for the first quarter, a 4.3 percent increase compared with the previous quarter. That increase suggests that price cuts were necessary to maintain growth amid rising EV competition.

At the same time, Tesla is expected to report auto gross margin of 23 percent after the market close Wednesday, according to a Visible Alpha survey of market analysts. A year earlier, Tesla reported a 33 percent gross margin, Reuters said.

The profit reduction was expected after price cuts of up to 20 percent on some versions of Tesla’s best-selling Model Y crossover in the U.S. Tesla has also cut prices in Asia, Europe and the Middle East to bolster sales this year.

In January, Tesla CFO Zachary Kirkhorn estimated that gross margin would not fall below 20 percent, which is still very healthy by industry standards. Tesla’s stock price this year was up by more than 70 percent as of Monday’s close.

Wedbush analyst Daniel Ives, who is bullish on Tesla, said in a Twitter post Sunday that the main focus of investors going into earnings is “the margin structure of the business model.”

“Auto gross margins north of 20 percent is the key,” he said.

Tesla already beat global sales expectations with first-quarter deliveries, Ives said, proving that the price cuts were a smart move by the automaker to defend its EV share.

Morgan Stanley said in a research note Monday that it expects “a decent” first-quarter report from Tesla but warned that maintaining a minimum 20 percent gross margin could be challenging if additional price reductions are necessary for growth.

“Our working assumption is that Tesla will continue its price cut campaign,” said Morgan Stanley analyst Adam Jonas. He said the firm has heard from investors who forecast a range of gross margins from 17 percent to above 24 percent in the first quarter, including items such as software sales and lower lithium prices that could boost profitability.

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