Tesla’s first-quarter financial performance fell short of expectations, with net income plummeting by 55% year-over-year. The Austin, Texas-based company reported earnings of $1.13 billion from January through March, down from $2.51 billion in the same period of 2022. Revenue also declined, falling by 9% to $21.3 billion. Tesla attributed the revenue decline to a nearly 9% drop in worldwide sales, which the company said was due to increased competition and slowing demand for electric vehicles. The company also cited an arson attack at its German plant and factory downtime related to the transition to an updated version of the Model 3 sedan as contributing factors to the revenue decline. Excluding one-time items such as stock-based compensation, Tesla reported earnings per share of 45 cents, below analyst estimates of 49 cents. The company’s gross profit margin, the percentage of revenue it gets to keep after expenses, fell once again to 17.4%, marking a decline from 19.3% a year ago and a peak of 29.1% in the first quarter of 2022.
Despite these financial setbacks, Tesla expressed optimism about its future growth prospects in a letter to investors. The company announced that production of smaller, more affordable models will begin in the second half of next year, ahead of previous guidance. These smaller models, which are expected to include the Model 2 small car, will use new-generation vehicle underpinnings and some features of current models. The company said it would be built on the same manufacturing lines as current vehicles.
Tesla’s CEO, Elon Musk, has touted the robotaxi as a growth catalyst for the company since the hardware for it went on sale in late 2015. He has called the system “Full Self Driving,” even though the company says on its website that it can’t drive itself and humans must be ready to take control at all times. In 2019, Musk promised a fleet of autonomous robotaxis by 2020 that would bring income to Tesla owners and make their car values appreciate. However, the autonomous robotaxis have been delayed year after year as the company gathers road data for its computers through testing by owners.
Industry analysts have expressed skepticism about Tesla’s robotaxi plans and voiced concerns that Musk may have canceled or delayed plans for the Model 2. Last weekend, Tesla lowered the prices of the Models Y, S, and X in the U.S. by $2,000 and reportedly made cuts in other countries, including China. The company also slashed the cost of “Full Self Driving” by one third to $8,000. In a note to investors, Bank of America Global Research analyst John Murphy wrote that Tesla’s shares have been under pressure since the start of the year due to weaker EV sales and production that exceeds demand.
From January through March, Tesla manufactured 433,371 vehicles and delivered 386,810, exceeding sales by over 46,000 units. This is despite price cuts of up to $20,000 on some of its more expensive models last year. Last week, Tesla announced that it would cut 10% of its 140,000 employees. The company also announced that it would ask shareholders to restore a $56 billion pay package for Musk that was rejected by a Delaware court.
