Tesla’s Share Price Plummets 8% After Missing Profit Estimates
In a surprising turn of events, Tesla’s share price fell 8% in extended trade after the electric vehicle (EV) maker reported lower-than-expected net profit in the second quarter. This news comes as a shock to investors, as Tesla’s profit margin is now at its lowest in over five years.
The company’s Q2 net income declined to $1.48 billion from $2.70 billion a year ago, a significant drop that can be attributed to price cuts aimed at boosting demand and increased spending on artificial intelligence (AI) projects. Tesla’s adjusted earnings of 52 cents per share also missed Wall Street estimates of 62 cents, as reported by Reuters.
Tesla CEO Elon Musk cited restructuring charges and higher operating expenses, particularly related to AI projects, as factors contributing to the decline in profit. The company recently laid off more than 10% of its workforce in an effort to reduce costs.
Despite the disappointing profit numbers, Tesla reported Q2 revenue of $25.50 billion, slightly exceeding analyst expectations. However, the company’s automotive gross margin, excluding regulatory credits, fell short of analysts’ estimates at 14.6%.
One bright spot for Tesla was its record sales of regulatory credits, which nearly tripled to $890 million in the second quarter. Traditional automakers purchase these credits from Tesla to meet clean-vehicle production regulatory targets.
Looking ahead, Tesla expects a sequential increase in production in the third quarter. Musk also mentioned that new competitors offering discounted EVs have posed challenges for Tesla in the market.
In a surprising move, Tesla delayed the unveiling of its Robotaxi product to October 10 from August 8, citing the need to make important changes to the technology. The company emphasized that the timing of Robotaxi deployment depends on technological advancements and regulatory approval.
Despite these setbacks, Musk expressed confidence that Tesla’s “supervised” Full Self-Driving software, which requires driver attention, would likely receive regulatory approval in China and Europe by the end of the year.
Overall, Tesla’s share price has eased 0.8% year-to-date, but has seen a significant rally of over 30% since shareholders approved Musk’s $56 billion pay package in June. The company continues to face challenges in the EV market, but remains optimistic about its future prospects.
(With inputs from Reuters)
