Tesla profits fall by 55%, and the company says that electric car sales are “under pressure” from hybrid cars

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Tesla's profits fell by 55% to $1.13 billion in the first quarter compared to the same period last year due to a prolonged strategy to reduce the prices of electric cars and “several unexpected “Challenges” Cutting into the auto industry's bottom line.

Tesla reported revenues of $21.3 billion In the first quarter, a decrease 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, down 54% from the same period last year.

The company said in First quarter earnings report It said it faced “several challenges” in the first quarter, including the Red Sea conflict, an arson attack at the Berlin Gigafactory and the gradual rollout of the updated Model 3 at its factory in Fremont, California. Tesla also noted that global electric vehicle sales remain under pressure as many automakers prioritize hybrids over electric vehicles. On the upside, this hybrid approach means that automakers continue to buy regulatory credits; Tesla received $442 million in zero emissions tax credits in the first quarter.

“The global adoption rate of electric vehicles is under pressure, and many other automakers are pulling back from electric vehicles and pursuing hybrids instead,” Tesla CEO Elon Musk said in his opening remarks on the earnings call. “We believe this is not the right strategy, and that electric vehicles will eventually dominate the market.”

Pop stocks on future promises

The results were published after markets closed on Tuesday. Sent shares up to 12% Following the release, investors appeared to focus more on Tesla's forward-looking statements about future products, including an upside-down product roadmap to bring many cheaper vehicles to market by 2025.

Despite the downward trend in earnings, Tesla used its first-quarter report to focus on the future, specifically around using artificial intelligence to make progress in autonomous driving and introduce new products, including those built on its next-generation vehicle platform. The company spent $1.1 billion on research and development in the first quarter, an increase of 49% over the same quarter in 2023.

Musk emphasized that despite the downward pressure, the company was focusing on and investing in the future. Specifically, Musk said the company is accelerating work on a new vehicle lineup with production expected in early 2025, if not late this year.

“These new vehicles, including more affordable models, will use aspects of our next-generation platform as well as aspects of our existing platforms,” he said. “We will be able to produce on the same manufacturing lines as our current vehicle lineup.”

Cost of price reductions

Tesla has seen electric vehicle sales grow over the past several years, reaching a new record of 1.8 million vehicles in 2023. But the company's profits have suffered thanks to repeated price cuts that began in late 2022.

While these price cuts provided a temporary boost in sales, they did not have a lasting effect. Tesla delivered 386,810 vehicles in the first quarter of 2024, down 20% from the 484,507 vehicles it delivered in the fourth quarter of 2023. And it wasn't just a quarterly quarter, either; Tesla delivered 8.5% fewer vehicles compared to the first quarter of 2023. Automotive gross profit margins, excluding regulatory credits, contracted to 16.35% in the first quarter compared to 18.96% in the same period last year.

Tesla warned in January that its car sales growth “may be significantly 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 smaller electric car that costs about $25,000. The company is also preparing a “robot taxi” built on the same platform. Meanwhile, Tesla's only new model is the expensive (and fussy) Cybertruck; The company has launched new variants on existing models, including the Tesla Model 3 Performance.

The smaller, cheaper electric vehicle will go into production in late 2025 at the company's Texas factory and eventually expand to a yet-to-be-built factory in Mexico, Musk said during the company's January earnings call.

Three months later, Musk appears to have changed the game for the company's low-cost electric vehicles. Musk has reportedly replaced the plan for a purpose-built, low-cost electric vehicle on the new platform. Instead, he now wants to push hard into the robotaxi, which will be unveiled in one form or another in August, while also launching “new models” that in some way use what is being developed for that new platform.

Less than two weeks after announcing the launch date for Robotaxi, Musk has overseen a 10% headcount reduction and restructuring that puts autonomy into sharp focus. Two prominent executives have also left the company — Drew Baglino, Tesla's senior vice president of power and energy, and Rohan Patel, vice president of public policy and business development. Tesla CFO Vaibhav Taneja said Tuesday during an earnings call that savings I was born Of workforce reduction is is expected to He is Good in excess to $1 one billion on that annual Basis.

Other revenue sources

While automotive revenues declined, there were gains in other parts of the business, particularly energy storage.

The company reported that energy storage deployments increased to a record high of 4.1 gigawatt hours. This pushed power generation (i.e. solar) and storage revenues to $1.6 billion in the first quarter, an increase of 7% from the same quarter last year. Tesla noted that most of this growth came from increased Megapack deployments, which was partially offset by a decline in solar installations.

The company also reported $2.28 billion in revenue from services, including capital generated from its Supercharger network. This revenue source is supposed to increase as more automakers, including Ford, GM, Rivian and VW, adopt Tesla's technology known as the North American Charging Standard.

Tesla semi delayed

As Tesla moves forward with its autonomy and new product roadmap, 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.

Production of the Tesla Semi, originally scheduled to go into production in 2019, has been repeatedly postponed. The company unveiled a nearly production-ready car in December 2022 and delivered a handful of them to Pepsi, its first customer, as a trial version. But it has not yet increased production volume.

Last June, Musk said the company would not even begin production of the large Class 8 rig End of 2024. Production of the first Semis is now scheduled for late 2025 with third-party customers starting in 2026, according to Tesla.

Tesla is finalizing the engineering for the Semi to allow for “highly cost-effective, highly efficient production,” according to information shared on the call. The company shared in its first-quarter earnings report that it has begun construction of a Tesla Semi factory near the so-called Gigafactory in Sparks, Nevada.