Tesla reported its first-quarter (Q1) earnings results that significantly missed analysts’ expectations. However, the company’s shares jumped more than 10% in after-hours trading in the US as CEO Elon Musk indicated that the mass production for affordable EVs would possibly be launched sooner than expected.
He also expressed optimism towards the energy storage expansion and the development of AI training for self-driving.
Tesla posts the deepest revenue drop in over a decade
In the first quarter, Tesla's revenue came in at $21.3 billion, falling short of the estimated $22.3 billion, marking a 9% decrease from the same quarter last year—the most significant year-on-year drop since the third quarter of 2012.
Automotive revenue declined by 13% year-on-year to $17.38 billion, attributed to weakened demand and heightened competition. Net income decreased to $1.54 billion, down 48% from a year ago, missing expectations of $1.79 billion, which led to an earnings per share (EPS) of $0.45, lower than the estimated $0.52.
Despite a huge miss on expectations across key aspects of the business growth, there are notable bright spots in Tesla’s earnings report. Energy generation and storage revenue saw a 7% increase, reaching a record high of $1.64 billion, with energy deployments rising to a record 4.1 GWh. Elon Musk stated that he expects continuous growth in this division.
Moreover, Tesla's AI training capacity nearly doubled sequentially, reaching an all-time high.
Affordable EVs to be launched in 2025
in the earnings press conference, Elon Musk stated that the company aims to accelerate the mass production of affordable EV models, advancing the timeframe to the first half of 2025 from the second half of 2025.
The message is a key driver for Tesla’s price action to its earnings given that the automotive segment constitutes 82% of its total revenue. This strategic move is deemed significant in bolstering Tesla's competitive stance against rivals, particularly Chinese EV manufacturers like BYD and Xiaomi.
Since 2023, Tesla has encountered substantial growth deceleration attributed to weakened demand and strong competition. Elon Musk highlighted challenges confronting the EV industry, citing pressure on electric car adoption amidst a trend towards hybrid vehicles among consumers.
Macroeconomic headwinds have eroded affordability for buyers, rendering cheaper models more appealing. The price cuts throughout 2023 have impacted Tesla's profit margin, necessitating the introduction of a lower-cost model to reclaim its dominant market share, particularly in China.
Tesla’s shares record a 35% year-to-date decline
Following its earnings report, Tesla's stocks surged by 12%; however, they still reflect a year-to-date (YTD) decline of 35%. A barrage of negative news surrounding Tesla has exerted downward pressure on its share price.
In the first quarter, Tesla reported a disappointing delivery figure for the first quarter, totalling 368,810, marking an 8.5% decrease compared to the same quarter last year and a sequential drop of 20%. Production also experienced a slowdown, decreasing by 12.5% from the previous quarter to 433,371 units.
On April 15, Tesla revealed plans to reduce its global workforce by over 10% in response to a sales slowdown and escalating price competition. This announcement resulted in a 5.6% decline in Tesla's shares on that day. According to a report by the BBC, the carmaker is set to eliminate over 6,000 jobs in Texas and California, equating to approximately 12% of Tesla's total workforce.
Additionally, Tesla issued a recall for nearly 4,000 Cybertrucks due to a sticking accelerator pedal issue. The incident may slow down the ramp-up of production for the long-waited mass production, which has been considered Tesla’s new model to bolster its sales in 2024.
Tech giants rally across the board
Not only Tesla but also a majority of the US tech shares experienced a sharp rebound this week, driven by a relief rally amid eased tensions in the Middle East. Following Netflix, Tesla’s earnings report is the first one that has been released of the US Magnificent Seven’s results this week.
The introduction of the cheaper version is viewed as a positive move by investors. Nonetheless, the macroeconomic landscape remains a pivotal factor influencing the trajectory of the technology sector.
Meta Platform's first-quarter earnings report is scheduled for release later today, with Microsoft and Alphabet to follow on Thursday.
