Tesla's profits fell 55% to $1.13 billion in the first quarter from the same period a year earlier as a result of a prolonged electric vehicle price reduction strategy and “several unexpected challenges” affect the automaker's bottom line.
Tesla reported revenue of $21.3 billion in the first quarter, a drop of 9% compared to the first quarter of 2023. Analysts surveyed by Yahoo Finance expected earnings of $0.51 per share on $22.15 billion in revenue. Tesla reported operating income of $1.2 billion in the first quarter, a 54% decline from the same period a year earlier.
The company said in its First quarter earnings report which experienced “numerous challenges” in the first quarter, including the Red Sea conflict and arson attack on the Berlin Gigafactory and the gradual ramp-up of the updated Model 3 at its factory in Fremont, California. Tesla also noted that global EV sales remain under pressure as many automakers prioritize hybrids over electric vehicles. On the plus side, that hybrid approach has meant automakers continue to buy regulatory credits; Tesla earned $442 million in zero-emissions tax credits in the first quarter.
“The global EV adoption rate is under pressure and many other automakers are abandoning electric vehicles and opting for plug-in hybrids,” Tesla CEO Elon Musk said in opening remarks at the conference. results conference call. “We believe this is not the right strategy and that ultimately electric vehicles will dominate the market.”
stocks rise on future promises
The results, released after markets closed on Tuesday, sent the stock up 9% Following the launch, investors appeared to be more focused on Tesla's forward-looking comments on future products, including a revised product roadmap.
Despite the downward trend in profits, Tesla used the first quarter report to focus on the future, specifically the use of ai to advance autonomy and the introduction of new products, including those built on a platform of next generation vehicles. The company spent $1.1 billion on research and development in the first quarter, a 49% increase from the same quarter in 2023.
Musk emphasized that despite the downward pressure, the company was focused and investing in the future. Specifically, the company is accelerating work on a new line of vehicles with production expected in early 2025, if not later this year, Musk said.
“These new vehicles, including more affordable models, will use aspects of the next-generation platform as well as aspects of our current platforms,” he said. “And we will be able to produce on the same manufacturing lines as our current vehicle line.”
The cost of price cuts
Tesla has seen electric vehicle sales grow in recent years, reaching a new record of 1.8 million vehicles in 2023. But the company's profits have taken a hit thanks to repeated price cuts that began in late 2022.
While those price cuts provided a temporary boost in sales, they have had no lasting effect. Tesla delivered 386,810 vehicles in the first quarter of 2024, down 20% from the 484,507 it delivered in the final quarter of 2023. This wasn't just a quarter-on-quarter issue, either; Tesla delivered 8.5% fewer cars than in the first quarter of 2023. Auto sector gross margins, excluding regulatory credits, fell to 16.35% in the first quarter compared to 18.96% in the same period of the previous year.
Tesla warned in January that its vehicle sales growth “may be noticeably lower” in 2024, noting at the time that it was between “two major waves of growth” and preparing to launch a new vehicle platform to build a smallest electric vehicle costing around $25,000. The company has also been preparing a “robotaxis” built on the same platform. Meanwhile, Tesla's only new model is the expensive (and demanding) Cybertruck; The company has launched new variants of existing models, including the Tesla Model 3 Performance.
Musk said during the company's earnings call in January that the smaller, cheaper electric vehicle would begin production in late 2025 at the company's factory in Texas and would eventually expand to a yet-to-be-built factory in Mexico.
Three months later, Musk appears to have changed the company's strategy for low-cost electric vehicles. Musk reportedly replaced the plan with a low-cost electric vehicle built specifically on the new platform. Instead, he now wants to jump headlong into robotaxi, which will be unveiled to some extent in August, while also launching “new models” that somehow use what is being developed for that new platform.
Less than two weeks after announcing the robotaxi launch date, Musk oversaw a 10% reduction in staff and a restructuring that puts autonomy in the spotlight. Two high-profile executives, Drew Baglino, Tesla's senior vice president of powertrain and energy, and Rohan Patel, vice president of public policy and business development, also left the company. Tesla CFO Vaibhav Taneja said during the earnings call on Tuesday that the savings generated of the reduction of the workforce is expected to be Well in excess of $1 billion in a annual base.
Other sources of income
While automotive revenue fell, there were gains in other parts of the business, particularly energy storage.
The company reported that energy storage deployments increased to a record 4.1 GWh. That boosted revenue from power generation (i.e. solar) and storage to $1.6 billion in the first quarter, a 7% increase from the same quarter last year. Tesla noted that most of that growth came from increased Megapack deployments, which was partially offset by a decline in solar installations.
The company also reported $2.28 billion in service revenue, including capital generated by its Supercharger network. That revenue stream should increase as more automakers, including Ford, GM, Rivian and VW, adopt Tesla's technology known as the North American Charging Standard.
Tesla semi delayed
While Tesla makes progress on autonomy and a roadmap of new products, other projects continue to be delayed. Mass production of the Tesla Semi, which was first revealed in November 2017, will now be postponed for another year.
The Tesla Semi, which was originally scheduled to go into production in 2019, has been repeatedly delayed. The company revealed a production-ready Semi in December 2022 and delivered a handful to Pepsi, its first customer, for a pilot. But it still has to increase production volume.
Last June, Musk said the company wouldn't start producing the big Class 8 truck until end of 2024. According to Tesla, the first semi-production vehicles are now planned for late 2025 and external customers will begin in 2026.
Tesla is finalizing engineering of the Semi to enable “super-profitable high production,” according to information shared on the call. The company shared in its first-quarter earnings report that it has begun construction on a Tesla Semi factory near its so-called Gigafactory in Sparks, Nevada.
