AUSTIN, Texas: During the April-June period, Tesla's strategy to cut prices to increase sales will likely lead to its strongest revenue growth in five quarters, while also dragging down profit margins to a three-year low.

Headed by billionaire Elon Musk, the producer of electric-vehicles (EV) and the world's most valuable automaker, began a price war late last year against legacy automakers, such as Ford, and Chinese rivals, including BYD, in a bid to increase demand.

Visible Alpha reported this week that Tesla's gross profit margin is expected to decline to 18.9 percent in the second quarter, compared with 20.2 percent in the previous quarter and 25.9 percent one year earlier.

Vitaly Golomb, an investment banker who focuses on mobility, noted, "The only reason Tesla delivered slightly more cars in the second quarter than the previous three months was because it discounted heavily, at the cost of its margins."

"It is clear they are very much a car company with the same supply chain and demand pressures as other manufacturers. They even have a growing inventory of their three- and six-year-old design Model 3s and Model Ys, and really seem to have hit a certain saturation point on demand," he added.

While Tesla assembled 13,560 more vehicles in the quarter than it sold to customers, a lack of new models stifled its ability to compete with rivals in China, where an uneven economic recovery and newer, glitzier offerings from local players have reduced Tesla's market share.

"Tesla's market share for the EV segment is likely to decline over time. However, I think the more appropriate metric to look at is Tesla's total auto market share, which continues to grow as they continue to grow deliveries," said Morningstar analyst Seth Goldstein, as quoted by Reuters.