Tesla’s profit fell 55% to $1.13 billion in the first quarter from the same period last year as a prolonged strategy to lower EV prices and “enough unexpected challenges” cut into the automotive industry’s bottom line.
Tesla reported revenue of $21.3 billion in the first quarter, down 9% from the first quarter of 2023. Analysts polled by Yahoo Finance had expected earnings of $0.51 per share on revenue of $22.15 billion. Tesla reported operating income of $1.2 billion in the first quarter, down 54% from the same period last year.
The company told her 1st quarter earnings report that it faced “many challenges” in the first quarter, including the Red Sea conflict and the arson attack at the Berlin Gigafactory and the gradual ramp-up of the updated Model 3 at its Fremont, California plant. Tesla also noted that global EV sales continue to be under pressure as many automakers prioritize hybrids over EVs. On the other hand, this hybrid approach means that automakers continue to buy regulatory credits. Tesla earned $442 million in zero-emissions tax credits in the first quarter.
“Global electric vehicle adoption is under pressure, and many other automakers are pulling away from EVs and pursuing plug-in hybrids instead,” Tesla CEO Elon Musk said in his opening earnings call. “We believe this is not the right strategy and electric vehicles will eventually dominate the market.”
Shares appear in future promises
The results, released after markets closed on Tuesday, sent shares up 9% after the launch, as investors appeared more focused on Tesla’s forward-looking remarks about future products, including a revised product roadmap.
Despite the downward trend in earnings, Tesla used its first-quarter report to focus on the future, specifically using artificial intelligence to advance autonomy and introducing new products, including those built on a next-generation vehicle platform. The company spent $1.1 billion on research and development in the first quarter, a 49% increase from the same quarter in 2023.
Musk stressed that despite downward pressure, the company was focused on — and investing in — the future. Specifically, the company is accelerating work on a new range of vehicles with production expected in early 2025, if not later this year, Musk said.
“These new vehicles, including more affordable models, will use aspects of the next-generation platform as well as aspects of our current platforms,” he said. “And we will be able to produce on the same production lines as our current line of vehicles.”
The cost of lowering prices
Tesla has seen EV sales grow over the past several years, topping 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 to sales, it had no lasting effect. Tesla delivered 386,810 vehicles in the first quarter of 2024, down 20% from the 484,507 it delivered in the final quarter of 2023. That wasn’t just a blip over the quarter, either. Tesla delivered 8.5% fewer cars from the first quarter of 2023. The automaker’s gross margins, excluding credits from regulators, shrank to 16.35% in the first quarter compared to 18.96% in the same period last year.
Tesla warned in January that its vehicle sales growth “may be significantly lower” in 2024, noting that at the time it was between “two big growth waves” and preparing to launch a new vehicle platform to build a smaller EV which costs about $25,000. The company is also preparing a “robotaxis” built on the same platform. Meanwhile, Tesla’s only new model is the expensive (and noisy) Cybertruck. the company has launched new variants of existing models, including the Tesla Model 3 Performance.
Musk said during the company’s earnings call in January that the smallest and cheapest EV will go into production in late 2025 at the company’s plant in Texas and eventually expand to a yet-to-be-built plant in Mexico.
Three months later, Musk appears to have changed the company’s low-cost EV playbook. Musk has reportedly replaced the plan with a low-cost EV built specifically on the new platform. Instead, it now wants to get into the robotaxi, which will be revealed in some capacity in August, while also launching “new models” that somehow use what’s being developed for this new platform.
Less than two weeks after announcing the robotaxi’s launch date, Musk has overseen a 10 percent reduction in headcount and a restructuring that puts autonomy at the center. Two high-profile executives — Drew Baglino, Tesla’s vice president of Powertrain and Energy, and Rohan Patel, vice president of Public Policy and Business Development — also left the company. Tesla CFO Vaibhav Taneja said on Tuesday during the earnings call that the economies are created from reducing the workforce is expected to is Good in excess of $1 billion on one Annual base.
Other sources of income
While automotive revenue fell, there were gains in other areas of the business, notably energy storage.
The company reported that energy storage installations increased to a record 4.1 GWh. That pushed revenue for power generation (meaning solar) and storage to 1.6 billion in the first quarter, up 7% from the same quarter last year. Tesla noted that most of that growth came from an increase in Megapack installations, which was partially offset by a decline in solar installations.
The company also reported $2.28 billion in services revenue, including capital generated by its Supercharger network. That revenue stream will grow as more automakers, including Ford, GM, Rivian and VW adopt Tesla’s technology, known as the North American Charging Standard.
Tesla Semi delayed
While Tesla is pushing for autonomy and a new product roadmap, other projects continue to be delayed. Mass production of the Tesla Semi, which was first revealed in November 2017, has now been delayed for another year.
The Tesla Semi, originally slated to go into production in 2019, has been repeatedly delayed. The company unveiled a production-ready Semi in December 2022 and delivered a handful to Pepsi, its first customer, for a pilot. But it has yet to scale up production volume.
Last June, Musk said the company would not start producing the Class 8 big rig until the end end of 2024. The first production Semi vehicles are now planned for late 2025 with external customers starting in 2026, according to Tesla.
Tesla is finalizing the engineering for the Semi to enable “ultra-economic high production,” according to information shared in the call. The company shared in its first-quarter earnings report that it has begun construction on a Tesla Semi factory near its so-called Gigafactory in Sparks, Nevada.
