Technology
Wednesday, July 24th, 2024 5:48 pm EDT
Key Points
- Weaker-Than-Expected Earnings: Tesla reported a 7% decline in automotive revenue to $19.9 billion and a reduction in margins, leading to adjusted earnings of 52 cents per share, below the analyst estimate of 62 cents. This contributed to an 11% drop in Tesla’s stock price.
- Market Share and Competition: Tesla, while still the leading seller of electric vehicles in the U.S., is losing market share to competitors due to its aging vehicle lineup and Elon Musk’s controversial statements. The company has been compelled to cut prices and offer incentives to boost sales amid rising competition, particularly in China.
- Future Plans and Delays: Investors are keen on the introduction of a new mass-market car, which Musk announced is expected in the first half of next year. Additionally, the development of autonomous robotaxis was a major topic, with Musk optimistic about launching the service next year, despite a history of delayed promises, including the postponement of a robotaxi event to October.
Tesla shares experienced their steepest decline since January following the announcement of weaker-than-expected quarterly earnings and a further drop in automotive revenue. As of late Wednesday morning, the stock had plummeted 11% to $219.58, marking a 12% decrease for the year, in stark contrast to the Nasdaq’s 17% increase over the same period.
The company reported a 7% decline in automotive revenue from the previous year, totaling $19.9 billion, while overall margins also contracted. Despite this, total revenue saw a modest increase of 2%, reaching $25.5 billion. The decline in auto revenue and margins was attributed to Tesla’s need to reduce prices globally and offer various discounts and incentives amid slowing sales and intensifying competition, particularly in the Chinese market.
Although Tesla continues to dominate the U.S. electric vehicle market, it is losing market share to a growing number of competitors. This erosion in dominance is partly due to the company’s aging lineup of sedans and SUVs and the negative impact of Elon Musk’s controversial and politically charged statements.
For the second quarter, Tesla reported adjusted earnings of 52 cents per share, falling short of the average analyst estimate of 62 cents, according to LSEG. Additionally, Tesla’s adjusted operating margin fell to a three-year low, decreasing to 14.4% from 18.7% the previous year, marking the fourth consecutive quarter of margin shrinkage.
Investors are particularly interested in when Tesla will introduce a new mass-market car to refresh its vehicle lineup. Musk announced on Tuesday’s earnings call that Tesla is on track to launch a new “affordable” car in the first half of the coming year. Another significant topic during the call was Tesla’s robotaxi initiative. Musk envisions a future where Tesla owners can allow their vehicles to operate autonomously as part of an Uber-like ride-hailing service. When questioned about the timeline for the first robotaxi ride, Musk expressed confidence, stating he would be “shocked” if it couldn’t be achieved by next year.
However, Musk has a track record of ambitious promises that often face delays. He postponed the company’s robotaxi event to October, having initially planned it for August. Musk explained that the delay was necessary to implement important changes that would enhance the vehicle. He hinted at unveiling additional features but did not provide specific details.
Overall, Tesla’s recent earnings report highlighted the challenges the company faces, including declining revenue and margins, increased competition, and the need for new product introductions to maintain its market position. Despite these hurdles, Musk remains optimistic about the future, particularly with the anticipated launch of a more affordable car and the potential for autonomous robotaxi services.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/07/24/tesla-shares-fall-8percent-in-premarket-trading-after-weaker-than-expected-earnings.html
