Tesla’s shares surged by 13% following Musk’s announcement that the company plans to begin production of a new, affordable electric vehicle by early 2025
Tesla reported its largest decline in first-quarter revenue since 2012, with a 9% drop, missing analysts’ estimates. The decline can be attributed to ongoing price cuts. However, after CEO Elon Musk informed investors that production of new affordable EV models could begin sooner than expected, the stock saw an increase in extended trading.
Here’s how Tesla’s numbers compared to Wall Street’s expectations, based on a survey of analysts by LSEG:
– Earnings per share: 45 cents adjusted vs. the expected 51 cents
– Revenue: $21.30 billion vs. the expected $22.15 billion
Compared to the previous year, revenue fell from $23.33 billion, and dropped from $25.17 billion in the fourth quarter. Net income also decreased by 55% to $1.13 billion, or 34 cents per share, from $2.51 billion, or 73 cents per share, a year ago.
The decline in sales was even more pronounced than in 2020, which was due to disrupted production during the Covid-19 pandemic. Tesla’s automotive revenue fell by 13% to $17.38 billion in the first three months of 2024.
During the call, Musk mentioned the company’s plans to start production of new models “early in 2025, if not late this year,” contrary to the previous expectation of the second half of 2025. Musk also highlighted Tesla’s investments in artificial intelligence infrastructure and disclosed that the company is in talks with “one major automaker” regarding licensing its driver assistance system, known as the Full Self-Driving, or FSD, option in the US.
In its shareholder deck, Tesla expressed a pessimistic outlook for 2024, stating that the “volume growth rate may be notably lower than the growth rate achieved in 2023.”
Tesla shares, which had already fallen over 40% this year, reached their lowest point since January 2023 prior to a 13% increase after hours. Concerns over weak deliveries, competition in China, and ongoing price cuts have all contributed to the decline. In the first quarter, Tesla reported an 8.5% year-over-year decrease in vehicle deliveries.
The company also mentioned in the deck that it is accelerating the launch of new vehicles, including more affordable models, that will be produced on the same manufacturing lines as Tesla’s current lineup. Tesla aims to fully utilize its current production capacity and achieve over 50% growth in production compared to 2023 before investing in new manufacturing lines.
Additionally, Tesla showcased screens of a robotaxi-based ride-hailing service in the deck. The company has been promising a self-driving vehicle for years, but has yet to deliver on Musk’s promise.As sales growth in the EV industry slows down, Tesla and its key rivals have been cutting prices to stimulate demand. Tesla’s gross profits decreased by 18% in the first quarter, partly due to this year’s price cuts. After discussing operational challenges in the first quarter, including disruptions in the Red Sea supply chain, Musk stated during the call that Q2 is expected to be significantly better.
Tesla clarified that its total sales figures included revenue from earlier sales of its Full Self-Driving (FSD) option. The release of a feature called Autopark in North America allowed the company to recognize previously deferred revenue.
Chris Redl, autos analyst at Siena Capital, estimated that Tesla recognized around $700 million in deferred revenue in the quarter from FSD. This accounts for approximately 4.3% of Tesla’s automotive revenue after removing regulatory credits.
In a major restructuring move, Tesla saw two executives, Drew Baglino and Rohan Patel, resign this month. Musk, in a companywide memo last week, announced that the automaker was cutting more than 10% of its global workforce.
Capital expenditures increased to $2.77 billion, representing a 34% rise compared to the previous year.
Tesla reported negative free cash flow in the quarter, with a deficit of $2.53 billion. A year ago, the company reported free cash flow of $441 million, reaching $2.06 billion in the fourth quarter. Tesla attributed the negative figure to a $2.7 billion inventory buildup and $1 billion in capital expenditures on “AI infrastructure.”
Revenue in Tesla’s energy division grew by 7% to $1.64 billion, while services and other revenue rose by 25% to $2.29 billion compared to the same period last year.
During the earnings call, Musk was asked if he has any intention of leaving Tesla considering his numerous other responsibilities, such as leading SpaceX and overseeing X (formerly Twitter), among other businesses. Musk did not provide a direct answer but stated that he dedicates the majority of his time to work, rarely takes time off, and is committed to ensuring Tesla’s prosperity.
At the end of the call, Tesla’s Martin Viecha, vice president of investor relations, announced that he would be leaving the company in a couple of months after seven years. Musk expressed his gratitude toward Viecha.
News Source: cnbc