Tesla shares drop as revenue misses estimates and price cuts dent profit

Tesla on Tuesday reported its lowest profit margin in more than five years and missed Wall Street earnings targets in the second quarter, as the electric vehicle maker cut prices to revive demand while it increased spending on AI projects.

The company said it was on track to produce “new vehicles, including more affordable models” in the first half of 2025, although the models will result in achieving less cost reduction than previously expected.

Tesla recorded automotive gross margin excluding regulatory credits of 14.65% in the second quarter, compared with estimates of 16.29%, according to 20 analysts polled by Visible Alpha.

Its shares were down 5.2% in after-hours trading.

“Perhaps more than ever in the company’s recent history, Tesla’s investors need results; those will have to come fast – both for the humanoid robot and for the Robotaxi,” said Thomas Monteiro, senior analyst at Investing.com

The results were a reminder of headwinds facing the company in its main auto business, even as CEO Elon Musk reoriented the carmaker to self-driving technology, helping Tesla stock recoup most of its losses this year.

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The second quarter marked a tumultuous period for the EV maker, with Musk shelving development of an all-new cheaper car in favor of working on creating self-driving taxis. The company also laid off more than 10% of its employees in the face of slowing sales and rising competition.

Tesla said profit was also weighed down by an “increase in operating expenses largely driven by AI projects” and “restructuring charges.”

It previously said it expected to “recognize in excess of $350 million of costs primarily related to employee termination expenses in the second quarter of 2024.”

The company’s electric vehicle deliveries have fallen for two consecutive quarters as the automaker battles rising competition and slow demand stemming from a lack of affordable new models. Tesla’s sales of China-made EVs, which are also exported to Europe and other regions, slumped in the second quarter from a year earlier, whereas BYD and other Chinese automakers posted strong sales growth.

Tesla on Tuesday said it expected a sequential increase in production in the third quarter.

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The company reported revenue of $25.50 billion for the three months ended June, compared with $24.93 billion a year earlier. Analysts on average had estimated $24.77 billion, according to LSEG data.

Tesla’s sales of regulatory credits nearly tripled to $890 million in the second quarter from a year earlier. Traditional automakers buy credits from Tesla to meet clean-vehicle production regulatory targets.

Net income was $1.48 billion in the second quarter, compared with $2.70 billion a year ago.

Adjusted earnings of 52 cents per share missed the Wall Street consensus of 62 cents, as calculated by LSEG.

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Shares of Tesla have surged more than 30% since June 13, when shareholders voted to approve Musk’s $56 billion pay package that was invalidated by a Delaware court in January. Its shares were also boosted by hopes for robotaxis.

Tesla said on Tuesday the “timing of Robotaxi deployment depends on technological advancement and regulatory approval.”

In April, Musk announced that the company would unveil a new robotaxi on Aug. 8. He announced the news shortly after Reuters reported that Tesla had pivoted to self-driving taxis after shelved plans to develop a long-promised all-new cheaper car expected to be priced at around $25,000. But last week, he suggested the Aug. 8 event would be delayed to make design changes and show off more models. A source said the event has been pushed back to October.

“Elon is great at dangling the carrot in front of investors, but new ideas tend to be long on vision, but short on execution,” said David Wagner, head of equity and portfolio manager at Tesla investor Aptus Capital Advisors.

Musk had said in 2022 that Tesla expected to mass-produce a robotaxi with no steering wheel or pedal by 2024, after missing his targets for self-driving vehicles multiple times.

General Motors said on Tuesday its Cruise self-driving unit will focus its development efforts on a next-generation Chevrolet Bolt as it indefinitely delays its planned Origin vehicle that would not have a steering wheel.

Tesla said Cybertruck production “remains on track to achieve profitability by end of year.”

Tesla said it has started validation of its first prototype Cybertruck vehicles using its breakthrough battery manufacturing technology called dry coating, which is “a major cost reduction milestone once ramped.”

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