Agencies
Tesla reported its lowest profit margin in more than five years on Tuesday and missed Wall Street earnings targets in the second quarter, as the electric vehicle (EV) maker move to cut prices to revive demand and increased spending on AI projects along with layoffs weighed over performance.
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 the 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 an 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.
