It has been a tough year at Tesla, with its stock sliding more than 40% amid slumping sales, confusing product decisions and more price cuts. And now, Musk has ordered up the company's biggest layoffs ever and staked its future on a next-generation, self-driving vehicle concept called the ro…
Tesla’s first-quarter net income plummeted 55%, but the company says it will accelerate production of new, more affordable vehicles to boost sales.
The Austin, Texas, company said it made $1.13 billion from January through March compared with $2.51 billion in the same period a year ago.
Investors and analysts were looking for some sign that Tesla will take steps to stem its stock's slide this year and grow sales. The company did that in a letter to investors Tuesday, saying that production of smaller, more affordable models will start ahead of previous guidance.
The smaller models, which apparently include the Model 2 small car that is expected to cost around $25,000, will use new generation vehicle underpinnings and some features of current models. The company said it would be built on the same manufacturing lines as its current products.
On a conference call with analysts, CEO Elon Musk said he expects production to start in the second half of next year “if not late this year.”
New factories or massive new production lines won't be needed for the new vehicles, he said.
“This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times,” the investor letter said.
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.
Tesla repeated in the letter that it is between two major growth waves, the first one starting with sales of the Models 3 and Y. The company believes the second wave will come from “advances in autonomy and introduction of new products, including those built on our next generation vehicle platform.”
Shares of Tesla rose over 11% in trading after Tuesday’s closing bell, but they are down more than 40% this year.
Morningstar analyst Seth Goldstein said the company gave guidance about its future that was clearer than in the past, allaying investor concerns about production of the Model 2 and future growth. “I think for now we're likely to see the stock stabilize," he said. “I think Tesla provided an outlook today that can make investors feel more assured that management is righting the ship.”
But if sales fall again in the second quarter, the guidance will go out the window and concerns will return, he said.
Tesla reported that first-quarter revenue was $21.3 billion, down 9% from last year as worldwide sales dropped nearly 9% due to increased competition and slowing demand for electric vehicles. Tesla also blamed an arson attack at its German plant and factory downtime as it switched factories to an updated version of the Model 3 sedan.
Excluding one-time items such as stock-based compensation, Tesla made 45 cents per share, falling short of analyst estimates of 49 cents, according to FactSet.
The company’s gross profit margin, the percentage of revenue it gets to keep after expenses, fell once again to 17.4%. A year ago it was 19.3%, and it peaked at 29.1% in the first quarter of 2022.
The company also repeated that vehicle sales growth “may be notably lower” this year than last as it works on the launch of its next generation vehicle.
Many analysts say the sales decline raises questions about demand for Teslas and other electric vehicles.
Musk has been touting the robotaxi as a growth catalyst for Tesla since the hardware for it went on sale late in 2015. He has called the system “Full Self Driving,” even though the company says on its website that it can't drive itself and humans must be ready to take control at all times.
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 skeptical, and feared that Musk has canceled or delayed plans for the Model 2.
Last weekend, Tesla lopped $2,000 off the price of the Models Y, S and X in the U.S. and reportedly made cuts in other countries including China. It also slashed the cost of “Full Self Driving” by one third to $8,000.
In a note to investors Monday, 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.
From January through March, Tesla manufactured 433,371 vehicles and delivered 386,810, making over 46,000 more than it sold. This even after it cut prices last year on some of its more expensive models by up to $20,000.
For years, Musk has told owners and investors that Teslas with “Full Self Driving” software and hardware will be able to drive themselves and could earn money carrying passengers when they normally would have been parked.
But “Full Self Driving” thus far has not been anything other than a partially automated driver assist system that can't drive itself.
These are the 10 most popular electric cars in America, according to Edmunds
10 of the most popular EVs available today
1. Tesla Model 3: EPA-estimated 358 miles of maximum range
2. Chevrolet Bolt EV: EPA-estimated 259 miles of maximum range
3. Ford Mustang Mach-E: EPA-estimated 312 miles of maximum range
4. Hyundai Ioniq 5: EPA-estimated 303 miles of maximum range
5. Genesis G80 Electrified: EPA-estimated 282 miles of maximum range
6. BMW iX: EPA-estimated 324 miles of maximum range
7. Ford F-150 Lightning: EPA-estimated 320 miles of maximum range
8. Kia Niro EV: EPA-estimated 253 miles of maximum range
9. Polestar 2: EPA-estimated 270 miles of maximum range
10. Porsche Taycan: EPA-estimated 203 miles of maximum range
The logo for the Tesla Supercharger station is seen April 22, 2021, in Buford, Ga. Faced with falling global sales and a tumbling stock price, Tesla has slashed prices again on some of its electric vehicles and its “Full Self Driving” system.
Tesla CEO Elon Musk, seen March 9, 2020, in Washington, wrote on X on Sunday that Tesla prices change frequently “in order to match production with demand.”
A Tesla Cybertruck is on display Dec. 3 at the Tesla showroom in Buena Park, Calif. Tesla 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 Aug. 8.