Tesla, a leading company in sustainable energy with electric cars, solar panels, roofs, and batteries, has reported a weaker-than-expected earnings report for the second quarter (Q2 of 2024).
After a rocky first half of the year that saw Tesla cut more than 10% of its headcount, the company reported better-than-expected deliveries for the second quarter earlier this month. However, deliveries were still down from a year earlier for a second straight period.
The company’s automotive sales dropped for a second straight period, after its revenue dropped by 7%, missing Wall Street estimate. Analysts had projected stronger financial results based on Tesla’s previous performance and market expansion efforts.
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Revenue increased 2% from $24.93 billion a year earlier, but automotive revenue dropped to $19.9 billion from $21.27 billion in the same quarter a year ago. Also, operating income decreased YoY to $1.6B in Q2, resulting in a 6.3% operating margin. YoY, operating income was primarily impacted.
Following the unimpressive second-quarter report, Tesla shares fell more in premarket trading in the U.S. on Tuesday, after the electric carmaker missed expectations, as its auto business continued to face pressure.
The shortfall in Tesla’s Q2 2024 revenue has been attributed to higher-than-expected costs related to production and logistics, as well as pricing adjustments in response to competitive pressures. Meanwhile, recall that on July 2, 2024, Tesla’s deliveries beat Wall Street estimates, after the company reported that it produced 410,831 vehicles, and delivered 443,956, but the total number was down 4.8% from a year earlier.
During the quarter, Tesla offered discounts and other incentives, including subsidized financing deals, in China and the U.S. to spur demand. Those deals hit the company’s profitability, with its adjusted earnings margin falling to 14.4% from 18.7% in the second quarter of 2023.
Net income at Tesla declined 45% to $1.48 billion, or 42 cents a share, in the second quarter from $2.7 billion, or 78 cents a share, a year earlier. This has spurred the company to slash prices globally and offer discounts and incentives amid slowing sales and rising competition, especially in China one of its key markets.
As of 2023, there are about 123 automakers actively selling electric vehicles in China, many of which are fueled by generous subsidies from Beijing. In the domestic market, automakers are struggling through a price war led by BYD, Tesla’s biggest rival, and slowed EV sales growth.
CEO Elon Musk said, in opening remarks on Tuesday’s earnings call that Tesla will host a robotaxi unveiling event on Oct. 10, 2024. Originally, he had stated that the event would take place on Aug. 8.
It is however worth noting that Robotaxis was a huge focus on the earnings call. Musk envisions a world in which owners can authorize their Tesla vehicle to be used as part of an Uber-style ride-hailing service and where the cars would drive autonomously. The Tesla robotaxi and the “unsupervised” full self-driving software that Musk says will run them is at the center of the company’s future.
In Q2, the company in its report disclosed that it focused on reducing interventions with FSD (Supervised)1, while improving driving comfort. Notably, it rolled out a version of FSD (Supervised) that primarily relies on eye-tracking software to monitor driver attentiveness. Looking ahead to future autonomous driving and robotaxi service, Tesla has continued progress on software and hardware.