Tesla hits the wall with older models and falling sales
Tesla’s first-quarter net income plummeted 55 per cent as falling global sales and price cuts sliced into the electric vehicle maker’s revenue and profit margins.
Shares of Tesla rose 5.2 per cent in trading after yesterday’s closing bell, after the car maker said it would introduce new “more affordable models” before the second half of next year.
But the stock is still down more than 40 per cent this year. The S&P 500 index is up about 5 per cent.
No further details were offered on the “more affordable” models. In January, there was speculation that chief executive Elon Musk had scrapped plans for a US$25,000 ($43,400) Tesla, slated for late 2025. Yesterday’s announcement implies the low-cost model is still in Tesla’s plans, and still on track.
The Austin, Texas, company said it made US$1.13 billion from January to March compared with US$2.51 billion in the same period a year ago.
Revenue was down 9 per cent from last year as worldwide sales dropped due to increased competition and slowing demand for electric vehicles.
Tesla said in a letter to investors that its vehicle sales growth “may be notably lower” than last year as it works on the launch of its next generation vehicle and unidentified other products.
The next generation vehicle apparently is the small Model 2, which is expected to give Tesla more appeal to mass-market buyers. It wasn’t clear whether the company would continue to pursue that car.
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 on Aug. 8.
Shares of Tesla rose 5.2 per cent in trading after Tuesday’s closing bell, but they are down more than 40 per cent this year. The S&P 500 index is up about 5 per cent.
Musk has been touting the robotaxi as a growth catalyst for Tesla since the hardware for it went on sale late in 2015.
In 2019, Musk promised a fleet of autonomous robotaxis by 2020 that would bring income to Tesla owners and make their car values appreciate. Instead, they’ve declined with price cuts, as the autonomous robotaxis have been delayed year after year while being tested by owners as the company gathers road data for its computers.
Industry analysts are sceptical, and feared that Musk has cancelled or delayed plans for the Model 2.
Over the weekend, Tesla lopped US$2000 off the price of the Models Y, S and X in the US and reportedly made cuts in other countries including China.
It also slashed the cost of “Full Self Driving” by one-third to US$8000.
I Bank of America Global Research analyst John Murphy wrote that Tesla’s shares have been under pressure since the start of the year due to weaker EV sales, and production that exceeds demand.
“We retain some level of scepticism on Tesla’s growth prospects, but also see opportunities as the company will unveil future growth drivers (robotaxi and Model 2) in the coming months,” Murphy wrote.
Earlier, Musk wrote on X, that like other automakers, Tesla prices change frequently “in order to match production with demand”.
From January through March, Tesla manufactured 433,371 vehicles and delivered 386,810, making over 46,000 more than it sold.
This came even after it cut prices last year on some of its more expensive models by up to US$20,000.
Last week Tesla announced it would cut 10 per cent of its 140,000 employees, and key executive Andrew Baglino, senior vice president of powertrain and energy engineering, announced he was leaving after 18 years.
The company also announced that it would ask shareholders to restore a US$56 billion ($94.2b) pay package for Musk that was rejected by a Delaware court.
— With reporting by Herald staff