Tesla has reported a significant decrease in profits for the second quarter, primarily attributed to price cuts and increased spending on autonomous driving and other advanced technologies.
The electric vehicle company, led by Elon Musk, saw profits drop by 45 percent to $1.5 billion, while revenues reached $25.5 billion, a modest two percent increase driven by growth in its energy generation and storage segment.
Although Tesla’s earnings per share fell short of analyst forecasts, its revenues exceeded expectations.
Amidst intensifying competition leading to price reductions in key markets, Tesla recently implemented a workforce reduction of 10 percent, amounting to approximately 14,000 employees, as part of efforts to reduce costs for funding new investments.
This restructuring resulted in one-time expenses of $622 million in the second quarter related to severance and other charges, as highlighted by Chief Financial Officer Vaibhav Taneja.
While vehicle sales experienced a decline compared to the previous year, they displayed an uptick from the first quarter, indicating an improvement in overall consumer sentiment, according to Tesla’s earnings report.
Although Tesla has adjusted its outlook, anticipating lower vehicle volume growth this year, it plans to commence production of new, more affordable models in the first half of 2025.
In April, Musk announced an expedited timeline for this initiative, attracting positive reception from Wall Street analysts eager for fresh offerings.
At the recent event, Musk refrained from divulging further details, promising to address the topic during an upcoming product launch.
Regarding profitability projections, Tesla affirmed that its unconventional Cybertruck remains on track to achieve profitability by the end of 2024 as production scales up.
– Emphasis on Technology –
Tesla remains committed to advancing artificial intelligence and autonomous driving technologies, delaying a highly anticipated robotaxi event from August to October this year.
Highlighting the dependence on technological progress and regulatory approvals for robotaxi deployment, Tesla is diligently pursuing this venture due to its significant potential value.
Musk, during a conference call, mentioned the postponement aimed at enhancing the robotaxi features and introducing additional elements for the product unveiling scheduled for October 10.
Known for his visionary statements on autonomous vehicles, Musk has previously overestimated timelines for self-driving technology, conceding to his past optimism while expressing confidence in achieving full autonomy for robotaxis by the end of 2024, stating, “I would be surprised if we fail to achieve this by next year.”
– Navigating Political Uncertainty –
Against a backdrop of deepening involvement in electoral politics, Musk publicly supported Donald Trump in the 2024 presidential race despite the former president’s climate change skepticism, conflicting with Musk’s environmental priorities.
Following Musk’s endorsement on July 13 and commitment to contribute $45 million monthly to America PAC supporting Trump’s candidacy, concerns arose about a potential impact on Tesla’s plans to establish a new Gigafactory in Mexico should Trump’s proposed tariffs on Mexican goods come to fruition.
Highlighting the unpredictability of the political landscape, Musk indicated a need to reassess decisions post-election.
Prior to the earnings report, Tesla’s shares had remained relatively stable in 2024.
CFRA analyst Garrett Nelson revised his recommendation on Tesla from a buy to a hold, citing the delay in the robotaxi event as a factor dampening near-term prospects, despite maintaining faith in Tesla’s long-term growth narrative.
Attributing the downgrade to valuation concerns and the need for clarity on short-to-medium-term growth drivers amid recent share price fluctuations, Nelson underscored the wait for stronger catalysts.
Post-announcement, Tesla’s shares fell by 7.8 percent in after-hours trading.
AFP