Equities
Tesla accelerates cheaper car production amid sales slump, with plans to launch new models by 2025 as Q1 earnings fall short.
By Bill Bullington
ᐧ
Tesla Inc. has announced an acceleration in the production of more affordable models, aiming to begin before the second half of 2025. This move comes as the electric vehicle (EV) giant seeks to address a sales slump and a decline in its profit margins. Despite the challenging market conditions, Tesla's shares experienced a 7% increase in after-hours trading. The company's adjusted earnings per share for the first quarter stood at 45 cents, falling short of Wall Street's expectations of 52 cents a share. Revenue also saw a 9% decrease to $21.3 billion, marking the first year-over-year drop in deliveries since 2020.
Tesla's recent financial performance has shown signs of strain, with a 9% decline in first-quarter revenue and a continued erosion of profit margins. The automotive gross margin was reported at 16.4%, below the anticipated 17.6% and significantly lower than the 30% peak margin at the start of 2022. Amidst these challenges, Tesla has moderated its near-term growth expectations, suggesting that vehicle volume growth in 2024 may be notably lower as the company focuses on launching its next-generation vehicle and other products.
The company's strategy has faced scrutiny over the past year, particularly with its price slashing efforts across its lineup to boost sales volume, which ultimately did not significantly increase demand. Additionally, CEO Elon Musk's decision to prioritize the development of a dedicated robotaxi, despite lacking regulatory approval and possibly the technological capability, has raised investor concerns. Tesla is continuing to pursue a new module-based "unboxed" manufacturing process for its robotaxi model, planning to utilize existing manufacturing lines at current factories for a more prudent growth approach.
"The affordable vehicle is still planned to go into production."
Finance GPT
beta