Tesla reported Tuesday that it made significantly less money in the first three months of the year due to its tepid auto sales, reinforcing concerns among investors that the Elon Musk-led company is losing ground in the electric vehicle market.
Profits fell 55 percent to $1.1 billion from the first quarter of 2023, the company said. And revenue fell 9 percent to $21.3 billion.
A drop in profits was seen as inevitable after Tesla said this month that first-quarter sales fell 8.5 percent from a year earlier, and after the company announced plans to lay off more than 10 percent. of its employees worldwide, or around 14,000 people. The job cuts, including more than 2,000 workers at the company's factory in Fremont, California, were interpreted as a sign that Tesla was struggling to align costs with falling revenue.
A year ago, in the first quarter of 2023, Tesla said it earned $2.5 billion and had one of the best profit margins in the industry. But the company has been forced to cut prices, including in a new round last week, reducing the amount it earns for each car it sells. For a time, that strategy seemed to help boost the company's sales, but now Tesla appears to be struggling to attract buyers even with lower prices.
Tesla's operating profit margin in the quarter was 5.5 percent, half that of a year earlier and in line with what other automakers used to earn.
Tesla investors are increasingly concerned that its declining sales and profits are a symptom of larger problems, possibly pointing to the company's inability to respond effectively to increased competition from established automakers and competitors. new car manufacturers from China.
Musk recently signaled that Tesla would focus on self-driving technology and a vehicle he called Robotaxi, casting doubt on the company's plans to develop a new, lower-priced model that could make electric cars affordable for a wider audience. wider range of clients and people. in more countries.
But Tesla said Tuesday that it remained on track to begin producing a lower-priced vehicle in the second half of 2025. In a change designed to reduce the initial investment, the car will use some new components and others borrowed from existing vehicles. That strategy will allow Tesla to manufacture its new model without building new factories, the company said.
“This update may result in less cost reduction than previously expected,” the company said in a presentation to investors.
Shareholders expect Musk to answer questions about Tesla's strategy when he holds a conference call at 5:30 p.m. on Tuesday. But Musk has often disappointed those expectations in the past, and he has seemed unfazed by the 40 percent drop in Tesla's stock price this year.
He appeared to joke about Tesla's stock price when reacting to a drop in Nvidia shares last week that wiped more than $200 billion off the chipmaker's value. “Rookie numbers,” Musk said on x, the social media platform he owns.
Musk defended Tesla's price cuts, saying that all automakers adjust prices, but usually through incentives for dealers and other measures that are not as visible to buyers. Tesla sells cars directly to customers online rather than through franchised dealerships.
“Tesla prices must change frequently to match production to demand,” he said.
Tesla attributed the sales decline to the conflict in the Red Sea that has disrupted global supply chains, a fire that halted production at the company's factory near Berlin and the launch of an upgraded version of the Model 3 sedan in Fremont. Tesla also blamed other automakers' decision to sell more hybrid vehicles, which include a gasoline engine and batteries and electric motors, for putting pressure on sales of all-electric vehicles.
Musk on Monday postponed a planned trip to India, where he was expected to meet Prime Minister Narendra Modi and announce plans for a factory, citing “very heavy Tesla obligations.”
While the postponement may disappoint investors who had hoped India could be a new source of growth, it could also provide them with reassurance that Musk was addressing Tesla's problems with greater urgency. The company's models are unlikely to sell in large numbers in India, where most car buyers prefer smaller, more affordable vehicles.
Tesla's newest vehicle is the Cybertruck, a pickup truck the company began producing last year. But the company has sold only about 4,000, according to information that emerged in a recall last week, suggesting it won't be a significant source of growth.
The autonomous taxi is considered a long shot, in part because even the most advanced autonomous systems available today sometimes make glaring mistakes. Additionally, federal and state regulators will have to approve before Tesla can put such taxis on the roads. Tesla is not yet licensed to test self-driving vehicles in California, where it is expected to develop the Robotaxi software.
“Elon Musk has been promising Robotaxis since 2016,” said Jan Becker, CEO of Apex.ai, a company that provides software used by autonomous driving systems. “I don't see enough evidence of Tesla launching a Robotaxi, at least in the short term.”
Musk has done little to allay investor concerns about his plans. “It's not exactly betting on the enterprise, but betting on autonomy is a blindingly obvious move,” he said. “Everything else is like variations of a horse-drawn carriage.”
Until recently, Tesla was one of the few automakers making money from electric cars, but established manufacturers are catching up. General Motors, which also reported earnings Tuesday, has resolved production difficulties in making battery packs and is ramping up production, Paul Jacobson, the company's chief financial officer, said in a conference call with reporters.
GM remains reliant on its gasoline vehicle business, which was primarily responsible for a 24 percent rise in profits during the first three months of the year, to $3 billion. But the company hopes to sell electric vehicles profitably later this year, Jacobson said.
The focus on Tesla's earnings report on Tuesday was unusually intense after a series of recent events that raised questions about the company's direction and Musk's leadership.
Last week, Tesla's board disappointed investors who expected it to do more to make Musk focus on the auto business and spend less time on x, where his polarizing comments and affinity for right-wing conspiracy theories have alienated many potentials. customers.
The board moved to restore a $47 billion pay package for Musk that had been overturned by a Delaware court. The board also said it would ask shareholders to approve moving Tesla's corporate headquarters to Texas, a change Musk requested the day the Delaware court struck down his pay package in January on the grounds that it was excessive and that shareholders They were not properly informed. he reported when they approved it in 2018.
Neal E. Boudette contributed reports.
