Tesla Inc (TSLA.O) said July 2 that it delivered a record number of cars in the second quarter, beating market expectations as price cuts and U.S. federal credits helped make its electric cars cheaper.

The Elon Musk-led company delivered 466,140 vehicles between April and June, up 10 percent sequentially and 83 percent year-over-year. In the second quarter, the company also managed to close the gap between production and deliveries, a number closely watched by analysts, to 13,560 vehicles. In the first quarter, the company produced nearly 18,000 more cars than it delivered to customers.

According to nine analysts surveyed by Refinitiv, analysts on average expected Tesla to deliver 445,000 cars, with a low estimate of 439,875 and a high estimate of 450,000.

The results suggest that CEO Elon Musk's vow to chase sales by cutting prices has had the desired effect.

"Everyone is worried about inventory increases, and it looks like they've normalized," Caro said. "The difference between production and delivery is shrinking, which is exactly what Tesla said they would do."

Tesla does not break down quarterly deliveries by specific models or regions. the Model 3 and Model Y account for 96 percent of sales. Tesla also produces the Model S and Model X.

Tesla remains the largest maker of electric cars in the U.S., but it faces new competition globally. Its latest model is the Model Y, which debuts in 2020.

In China - its second-largest market - the company has fallen far behind BYD, which has a fresher lineup and growing global ambitions. Following last month's decision to offer cash subsidies to some Model 3 owners, Tesla announced last week that it was cutting the price of its premium models in China by more than 4.5 percent.

A new round of price cuts is coming

"This is a major blow," Ben Kallo of Robert W. Baird said in a phone interview Sunday morning. "People are still bracing for another round of price cuts, and such a large delivery volume makes that less risky."

Tesla sells cars directly to consumers and has many means to move vehicles. In addition to price cuts across its entire lineup earlier this year, the company has introduced perks to entice buyers, such as three months of free fast charging in the U.S. for cars delivered by June 30. Analysts expect the price cuts to continue into next year.

Dan Ives, an analyst at Wedbush Securities, said, "The price cut is a smart move for Tesla and pays a significant dividend in that space, especially in China."

Despite stiff competition from market leader BYD, Tesla expects to set sales records in China, its second-largest market after North America.

Ives added, "We believe margins will be in the doldrums for the next few quarters."

While Tesla's price cuts in the U.S., China and other countries suggest the strategy is helping to boost sales, investors want to know how the price cuts are affecting margins. In the first quarter, falling prices did hurt the company's bottom line - Tesla posted a 24 percent drop in net income compared to the same period last year.

Since the end of last year, Tesla has started cutting prices in China, eroding its profit margins in the first quarter. Tesla boss Elon Musk ramped up his price war in April, saying the electric vehicle (EV) maker would prioritize sales growth over profits in a weak economy and increased competition.