Home » Tesla, quarter in trouble: profits at their lowest since 2021, revenues falling more than in the pandemic.

Tesla, quarter in trouble: profits at their lowest since 2021, revenues falling more than in the pandemic.

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Finance

by Marco Valsania

Earnings and revenue in the first three months of 2024 fell by 55% and 9%, respectively. But Elon Musk promises acceleration on new models and the stock skyrockets

4′ reading

Tesla is suffering from a difficult quarter: the revenues of the American electric and hi-tech car leader have decreased for the first time since 2020 and even more so than in the months marked by the pandemic paralysis, indeed they have set a negative record since 2012. Profits for their part fell to the lowest levels since 2021. The declines were respectively 9% in turnover and 55% in profits, disappointing analysts’ expectations and keeping questions open about the group’s strategy.

Musk seeks redemption

Chief executive Elon Musk, in the results conference with analysts, responded to the challenge with a surprise. He promised news arriving earlier than expected so far: he stated that the production of new models will start “at the beginning of 2025 if not at the end of this year”. The promise corrected previous indications that similar developments would not take place before the second half of next year. Musk then boasted about the investments in artificial intelligence now being pursued by the company after delays. And, among the new developments, he indicated that he had also started negotiations with “a major car manufacturer” to license its advanced and controversial assisted driving system, called Full Self-Driving or Fsd.

Stock rises, but remains down in 2024

The stock gained 11% in the after-market, perhaps encouraged by these commitments to new generations of vehicles, which should include from a robotaxi to, above all, a new low-cost car that has so far seemed postponed – the Model 2. It remains however, down by around 40% since the beginning of the year, bringing up the rear of the so-called Magnificent Seven US high-tech companies and under pressure from a combination of slowdowns in the global electric vehicle market, price wars amid increasingly intense competition and aging of its product line. Numerous analysts have recently reduced the stock market target for the group.

Accounts under pressure

Tesla responded to the winds of crisis by recently starting a drastic reorganization which requires cutting 10% of the global workforce and saw the departure of two top executives. However, the open challenges still appeared evident in the accounts for the January-March period. In more detail, Tesla recorded profits of 1.13 billion, equal to 45 cents per share net of extraordinary items against at least 51 cents expected, and a turnover of 21.3 billion, compared to 22.15 billion hypothesized. Revenue from core automotive businesses slipped even more, 13% to $17.38 billion. Operating margin declined to 5.5% from 11.4% last year. Gross automotive profit margins, net of emissions credit collections that have traditionally inflated them, slipped to 16.4% from 19%. Per vehicle, operating profits were halved to $3,000.

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Accelerate on new models

In its balance sheet statement the company highlighted how “global sales of EVs (electric vehicles) continue to be under pressure, with many manufacturers prioritizing hybrids over electrics”. However, he asserted that he wanted to stand out: “While many reduce investments, we invest in future growth.” Echoing Musk, and to counteract the seemingly growing skepticism of analysts and investors, he added that “we have updated the future line of our vehicles to accelerate the launch of new models earlier than previously communicated, the second half of 2025”. Referring to what is coming soon, he spoke of “new vehicles, including more affordable models”. In the past, its managers had defined the group’s current position as being between two phases of growth, one now archived (hinged on the Model Y crossover and the Model 3) and one to come on which it has now unbalanced. A bet that also involves risks: operators and analysts will be waiting for evidence of new successes.

Production plans

Tesla, which had already reported a decline in quarterly delivery volumes of 8.5%, however admitted that in 2024 “volume growth could be significantly lower than the rate achieved in 2023”. The biggest recent innovation so far, the Cybertrack pickup, has taken off very slowly since late last year. The company, from the point of view of the production network and in homage to the rationalization of operations, also stated that the cars will be churned out by the current manufacturing chains, “fully utilized” to achieve “a production growth of over 50% compared to to 2023”, before making investments in new plants. From a longer-term strategic point of view, Musk has embraced the development of autonomous vehicles after assisted driving.

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The board: reapprove Musk’s record compensation

Tesla has also started a new campaign that is less industrial and innovative and more political-legal. Its board has asked shareholders to approve the move of its registered office to Texas, where it already has its headquarters, from Delaware. It’s no mystery why: a Delaware business court rejected the super compensation plan given to Musk, valued at up to a maximum of 55.8 billion, a record for a listed company, calling it “deeply flawed” and the result of a board of directors with little independence. The board simultaneously asked the members to approve Musk’s same golden package again.

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