Tesla's Profit Margins Hit Five-Year Low Amid Price Cuts and Incentives

Tesla profit margins worst in five years as price cuts, incentives weigh

Tesla on Tuesday reported its lowest profit margin in more than five years and missed Wall Street earnings targets in the second quarter, as the electric vehicle maker cut prices to revive demand while it increased spending on AI projects. The company said it was on track to produce new vehicles, including more affordable models, in the first half of 2025, although the models will result in achieving less cost reduction than previously expected. Shares fell 8% in after-hours trade. "Perhaps more than ever in the company's recent history, Tesla's investors need results; those will have to come fast - both for the humanoid robot and for the Robotaxi," said Thomas Monteiro, senior analyst at Investing.com. The second quarter was tumultuous, with CEO Elon Musk shelving development of an all-new cheaper car in favor of less ambitious lower-cost models and working on creating self-driving taxis, helping to boost shares. The company also laid off more than 10% of its employees to cut costs, and Tesla said profit was also weighed down by restructuring charges and an increase in operating expenses largely driven by artificial-intelligence projects. Tesla recorded automotive gross margin excluding regulatory credits of 14.6% in the second quarter, compared with estimates of 16.29%, according to 20 analysts polled by Visible Alpha. Dan Coatsworth, investment analyst at AJ Bell, said Tesla has now missed earnings targets for four quarters in a row. "There is a lot of talk about robotaxis, humanoid robots and autonomous driving, which provides an exciting narrative for investors but doesn't get over the fact that these are tomorrow's potential riches, not today's." Musk told analysts on a conference call that new competitors "have discounted their EVs very substantially, which has made it a bit more difficult for Tesla." The company's electric vehicle deliveries have fallen for two consecutive quarters as the automaker battles rising competition and slow demand stemming from a lack of affordable new models. Tesla's sales of China-made EVs, which are also exported to Europe and elsewhere, slumped in the second quarter from a year earlier, whereas BYD Co and other Chinese automakers posted strong sales growth. Tesla said on Tuesday it expected a sequential increase in production in the third quarter. The company reported revenue of $25.50 billion for the quarter, slightly ahead of last year and analyst targets, according to LSEG data. Tesla's sales of regulatory credits nearly tripled to a record $890 million in the second quarter from a year earlier. Traditional automakers buy credits from Tesla to meet clean-vehicle production regulatory targets. Net income was $1.48 billion in the second quarter, compared with $2.70 billion a year ago, with adjusted earnings of 52 cents per share missing the Wall Street consensus of 62 cents, as calculated by LSEG. ROBOTAXIS Shares of Tesla have surged more than 30% since June 13, when shareholders voted to approve Musk's $56 billion pay package that was invalidated by a Delaware court in January. Its shares were also boosted by hopes for robotaxis. Musk over the years has promoted Tesla as a technology company, most recently saying self-driving technology was key. Predictions of that technology maturing have been missed for years, but on Tuesday he forecast self-driving software would be able to drive Tesla vehicles without human supervision next year, saying he would be shocked if that were not the case. Tesla said on Tuesday the "timing of Robotaxi deployment depends on technological advancement and regulatory approval." But Musk said during the conference call, "I don't think regulatory approval will be a limiting factor." He also said Tesla was likely to win regulatory approval for its "supervised" Full Self-Driving software, which requires driver attention, in China and Europe by the end of this year. Musk said Tesla has delayed the unveiling of its Robotaxi product to Oct. 10 from Aug. 8 to make some important changes to the robotaxi. He had announced the Aug. 8 unveiling date after Reuters reported that Tesla had pivoted to self-driving taxis after shelving plans to develop a long-promised all-new cheaper car expected to be priced at around $25,000. "Elon is great at dangling the carrot in front of investors, but new ideas tend to be long on vision, but short on execution," said David Wagner, head of equity and portfolio manager at Tesla investor Aptus Capital Advisors. Musk had said in 2022 that Tesla expected to mass-produce a robotaxi with no steering wheel or pedal by 2024. General Motors said on Tuesday its Cruise self-driving unit will focus its development efforts on a next-generation Chevrolet Bolt as it indefinitely delays its planned Origin vehicle that would not have a steering wheel. Tesla said Cybertruck production "remains on track to achieve profitability by end of year." Tesla said it has started validation of its first prototype Cybertruck vehicles using its breakthrough battery manufacturing technology called dry coating, which is "a major cost reduction milestone once ramped" and that production could launch in the fourth quarter. (Reporting by Akash Sriram in Bengaluru and Hyunjoo Jin in San Francisco Additional reporting by Noel Randewich in Oakland, California Editing by Sriraj Kalluvila, Peter Henderson and Matthew Lewis)

Tesla profit margins worst in five years as price cuts, incentives weigh

Tesla reported its lowest five-year profit margin, missing Wall Street earnings targets. CEO Musk announced 2025 models amid rising AI expenses and layoffs. Self-driving taxis and China-made EV sales dipped. Gross margin was 14.6%. Cybertruck production is progressing. Net income was $1.48 billion with $25.50 billion revenue. Shares fell 8%.Tesla on Tuesday reported its lowest profit margin in more than five years and missed Wall Street earnings targets in the second quarter, as the electric vehicle maker cut prices to revive demand while it increased spending on AI projects. The company said it was on track to produce new vehicles, including more affordable models, in the first half of 2025, although the models will result in achieving less cost reduction than previously expected. Shares fell 8% in after-hours trade. "Perhaps more than ever in the company's recent history, Tesla's investors need results; those will have to come fast - both for the humanoid robot and for the Robotaxi," said Thomas Monteiro, senior analyst at Investing.com. The second quarter was tumultuous, with CEO Elon Musk shelving development of an all-new cheaper car in favor of less ambitious lower-cost models and working on creating self-driving taxis, helping to boost shares. The company also laid off more than 10% of its employees to cut costs, and Tesla said profit was also weighed down by restructuring charges and an increase in operating expenses largely driven by artificial-intelligence projects. Tesla recorded automotive gross margin excluding regulatory credits of 14.6% in the second quarter, compared with estimates of 16.29%, according to 20 analysts polled by Visible Alpha. Dan Coatsworth, investment analyst at AJ Bell, said Tesla has now missed earnings targets for four quarters in a row. "There is a lot of talk about robotaxis, humanoid robots and autonomous driving, which provides an exciting narrative for investors but doesn't get over the fact that these are tomorrow's potential riches, not today's." Musk told analysts on a conference call that new competitors "have discounted their EVs very substantially, which has made it a bit more difficult for Tesla." The company's electric vehicle deliveries have fallen for two consecutive quarters as the automaker battles rising competition and slow demand stemming from a lack of affordable new models. Tesla's sales of China-made EVs, which are also exported to Europe and elsewhere, slumped in the second quarter from a year earlier, whereas BYD Co and other Chinese automakers posted strong sales growth. Tesla said on Tuesday it expected a sequential increase in production in the third quarter. The company reported revenue of $25.50 billion for the quarter, slightly ahead of last year and analyst targets, according to LSEG data. Tesla's sales of regulatory credits nearly tripled to a record $890 million in the second quarter from a year earlier. Traditional automakers buy credits from Tesla to meet clean-vehicle production regulatory targets. Net income was $1.48 billion in the second quarter, compared with $2.70 billion a year ago, with adjusted earnings of 52 cents per share missing the Wall Street consensus of 62 cents, as calculated by LSEG. ROBOTAXIS Shares of Tesla have surged more than 30% since June 13, when shareholders voted to approve Musk's $56 billion pay package that was invalidated by a Delaware court in January. Its shares were also boosted by hopes for robotaxis. Musk over the years has promoted Tesla as a technology company, most recently saying self-driving technology was key. Predictions of that technology maturing have been missed for years, but on Tuesday he forecast self-driving software would be able to drive Tesla vehicles without human supervision next year, saying he would be shocked if that were not the case. Tesla said on Tuesday the "timing of Robotaxi deployment depends on technological advancement and regulatory approval." But Musk said during the conference call, "I don't think regulatory approval will be a limiting factor." He also said Tesla was likely to win regulatory approval for its "supervised" Full Self-Driving software, which requires driver attention, in China and Europe by the end of this year. Musk said Tesla has delayed the unveiling of its Robotaxi product to Oct. 10 from Aug. 8 to make some important changes to the robotaxi. He had announced the Aug. 8 unveiling date after Reuters reported that Tesla had pivoted to self-driving taxis after shelving plans to develop a long-promised all-new cheaper car expected to be priced at around $25,000. "Elon is great at dangling the carrot in front of investors, but new ideas tend to be long on vision, but short on execution," said David Wagner, head of equity and portfolio manager at Tesla investor Aptus Capital Advisors. Musk had said in 2022 that Tesla expected to mass-produce a robotaxi with no steering wheel or pedal by 2024. General Motors said on Tuesday its Cruise self-driving unit will focus its development efforts on a next-generation Chevrolet Bolt as it indefinitely delays its planned Origin vehicle that would not have a steering wheel. Tesla said Cybertruck production "remains on track to achieve profitability by end of year." Tesla said it has started validation of its first prototype Cybertruck vehicles using its breakthrough battery manufacturing technology called dry coating, which is "a major cost reduction milestone once ramped" and that production could launch in the fourth quarter.

Tesla profit margins worst in five years as price cuts, incentives weigh

"Perhaps more than ever in the company's recent history, Tesla's investors need results; those will have to come fast - both for the humanoid robot and for the Robotaxi," said Thomas Monteiro, senior analyst at Investing.com The second quarter was tumultuous, with CEO Elon Musk shelving development of an all-new cheaper car in favor of less ambitious lower-cost models and working on creating self-driving taxis, helping to boost shares. The company also laid off more than 10% of its employees to cut costs, and Tesla said profit was also weighed down by an increase in operating expenses largely driven by artificial-intelligence projects and restructuring charges. Tesla recorded automotive gross margin excluding regulatory credits of 14.65% in the second quarter, compared with estimates of 16.29%, according to 20 analysts polled by Visible Alpha. Dan Coatsworth, investment analyst at AJ Bell, said Tesla has now missed earnings targets for four quarters in a row. "Tesla needs to find a better way to thrive in a more difficult environment for electric vehicles now rather than later," he said. The company's electric vehicle deliveries have fallen for two consecutive quarters as the automaker battles rising competition and slow demand stemming from a lack of affordable new models. Tesla's sales of China-made EVs, which are also exported to Europe and elsewhere, slumped in the second quarter from a year earlier, whereas BYD Co and other Chinese automakers posted strong sales growth. Tesla said on Tuesday it expected a sequential increase in production in the third quarter. Musk over the years has promoted Tesla as a technology company, most recently saying self-driving technology was key. Predictions of that technology maturing have been missed for years, but on Tuesday he forecast self-driving software would be able to drive Tesla vehicles without human supervision next year, saying he would be shocked if that were not the case. The company reported revenue of $25.50 billion for the quarter, slightly ahead of last year and analyst targets, according to LSEG data. Tesla's sales of regulatory credits nearly tripled to $890 million in the second quarter from a year earlier. Traditional automakers buy credits from Tesla to meet clean-vehicle production regulatory targets. Net income was $1.48 billion in the second quarter, compared with $2.70 billion a year ago, with adjusted earnings of 52 cents per share missing the Wall Street consensus of 62 cents, as calculated by LSEG. ROBOTAXIS Shares of Tesla have surged more than 30% since June 13, when shareholders voted to approve Musk's $56 billion pay package that was invalidated by a Delaware court in January. Its shares were also boosted by hopes for robotaxis. Tesla said on Tuesday the "timing of Robotaxi deployment depends on technological advancement and regulatory approval." Musk said that Tesla had delayed its unveiling of its Robotaxi product from August to Oct. 10 to allow for vehicle improvements. He had announced the focus on robotaxis after Reuters reported that Tesla had pivoted to self-driving taxis after shelving plans to develop a long-promised all-new cheaper car expected to be priced at around $25,000. "Elon is great at dangling the carrot in front of investors, but new ideas tend to be long on vision, but short on execution," said David Wagner, head of equity and portfolio manager at Tesla investor Aptus Capital Advisors. Musk had said in 2022 that Tesla expected to mass-produce a robotaxi with no steering wheel or pedal by 2024, after missing his targets for self-driving vehicles multiple times. General Motors said on Tuesday its Cruise self-driving unit will focus its development efforts on a next-generation Chevrolet Bolt as it indefinitely delays its planned Origin vehicle that would not have a steering wheel. Tesla said Cybertruck production "remains on track to achieve profitability by end of year." Tesla said it has started validation of its first prototype Cybertruck vehicles using its breakthrough battery manufacturing technology called dry coating, which is "a major cost reduction milestone once ramped" and that production could launch in the fourth quarter. (Reporting by Akash Sriram in Bengaluru and Hyun Joo Jin in San FranciscoAdditional reporting by Noel Randewich in Oakland, CaliforniaEditing by Sriraj Kalluvila, Peter Henderson and Matthew Lewis)

Tesla's profit margin is getting hammered by EV discounts and hefty AI spending

Elon Musk, co-founder of Tesla and SpaceX and owner of X Holdings Corp., speaks at the Milken Institute's Global Conference at the Beverly Hilton Hotel,on May 6, 2024 in Beverly Hills, California. As Tesla CEO Elon Musk continues to make lofty promises about his company's future in autonomous driving and robotics, investors keep watching profit margins deteriorate. In missing Wall Street estimates for second-quarter earnings on Tuesday, Tesla said its adjusted operating margin shrank to the lowest in three years, dropping to 14.4% from 18.7% a year earlier. It's the fourth straight quarter of shrinkage. The company reported just $1.48 billion in net income on revenue of $25.5 billion, which included $890 million in regulatory credits. Tesla is getting hit from both sides. Expenses are soaring as the company spends on the artificial intelligence infrastructure Musk says is needed to turn Tesla EVs into self-driving cars, and to develop humanoid robots capable of doing factory work and more. Meanwhile, deliveries of Tesla's most popular electric vehicles have been dropping this year, and the company has responded by slashing prices and offering other incentives like low-interest loans. "Affordability remains top of mind for customers," said Vaibhav Taneja, Tesla's chief accounting officer, on the company's earnings call. "And in response, in Q2, we offered attractive financing options to offset sustained high interest rates." Tesla shares tumbled about 8% in extended trading on Tuesday to $227.23. They were down less than 1% for the year as of the close, while the Nasdaq was up 20% over that stretch. Tesla said in its investor deck that the decline in operating income was due in part to the reduced average selling price and lower deliveries of its top EVs. Automotive revenue fell 7% from a year earlier, the second straight decline, as competition ramped up, most notably in China. Tesla began offering a five-year, zero interest loan offer to spur sales of its EVs in China in April. The deal was supposed to last through the end of July, but the company extended the offer again on Tuesday, according to a report from CnEVPost, a Shanghai-based EV news site. The company rolled out similar deals in Germany, home to Tesla's only European car factory. The offers included 0% financing over a four-year period for buyers of the new Model Y Long Range All-Wheel Drive purchased during the quarter.