Tesla profit falls 55%; Musk speeds plan for cheaper models
Tesla’s first-quarter net income plummeted 55%, but its stock price surged in after-hours trading Tuesday as the company said it would accelerate production of new, more affordable vehicles.
The Austin, Texas, company said it made $1.13 billion from January through March compared with $2.51 billion in the same period a year ago.
Investors and analysts were looking for some sign Tesla will take steps to stem its stock’s slide this year and grow sales. The company did that in a letter to investors Tuesday, saying production of smaller, more affordable models will start ahead of previous guidance.
The smaller models, which apparently include the Model 2 small car that is expected to cost around $25,000, will use new generation vehicle underpinnings and some features of current models. The company said it would be built on the same manufacturing lines as its current products.
On a conference call with analysts, CEO Elon Musk said he expects production to start in the second half of next year “if not late this year.”
New factories or massive new production lines won’t be needed for the new vehicles, he said.
“This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times,” the investor letter said.
The company also appears to be counting on a vehicle built to be a fully autonomous robotaxi as the catalyst for future earnings growth. CEO Elon Musk has said the robotaxi will be unveiled Aug. 8.
Tesla repeated in the letter it is between two major growth waves, the first one starting with sales of the Models 3 and Y. The company believes the second wave will come from “advances in autonomy and introduction of new products, including those built on our next generation vehicle platform.”
Shares of Tesla rose over 11% in trading after Tuesday’s closing bell, but they are down more than 40% this year. The S&P 500 index is up about 5%.
Tesla reported that first-quarter revenue was $21.3 billion, down 9% from last year as worldwide sales dropped nearly 9% because of increased competition and slowing demand for electric vehicles. Tesla also blamed an arson attack at its German plant and factory downtime as it switched factories to an updated version of the Model 3 sedan.
The company also repeated that vehicle sales growth “may be notably lower” this year than last as it works on the launch of its next generation vehicle.
Last week Tesla announced it would cut 10% of its 140,000 employees. The company also announced that it would ask shareholders to restore a $56 billion pay package for Musk that was rejected by a Delaware court.