Tesla’s stock prices have taken a hit following the release of its second quarter earnings, which showed a 45% decline in profits and a warning that cost reduction targets were off track. The electric vehicle maker’s stock fell 8% in after-hours trade, putting it on track for a decline of almost 50% in the year to date.
According to Chief Executive Elon Musk, the promised shift towards more affordable models is still on track for early 2025, but is proving to be more expensive than expected. The company’s cost of AI projects, including plans for humanoid robots, has also contributed to the decline in profits.
The company’s net profits for the April-June quarter were $1.48 billion, a significant decrease from the $2.7 billion achieved in the same period last year. Tesla’s profit margin is now at its lowest level in five years. This surge in spending on restructuring and development has coincided with a series of price cuts in an effort to drive sales. However, the company has seen a decline in electric vehicle deliveries for two consecutive quarters.
One of the major challenges facing Tesla is the rising competition from Chinese producers, who are selling at a considerable discount. Additionally, slow demand for Tesla’s vehicles is also a concern, as there is a lack of affordable new models. Investment analyst at AJ Bell, Dan Coatsworth, noted that Tesla has now missed earnings targets for four consecutive quarters. He also added that while there is a lot of excitement surrounding Tesla’s plans for robotaxis, humanoid robots, and autonomous driving, these are still future prospects and not immediate sources of revenue.
Senior analyst at Investing.com, Thomas Monteiro, echoed a similar sentiment, stating that Tesla’s investors are in need of results more than ever. He emphasized the need for fast results, especially in regards to the humanoid robot and the Robotaxi projects.
The release date for the Robotaxi project in Europe and China has been pushed back from August to October. Tesla stated that the timing of the deployment of Robotaxi is dependent on technological advancement and regulatory approval. During a conference call with investors, Musk expressed confidence that regulatory approval will not be a limiting factor.
Despite the decline in profits and stock prices, Tesla remains optimistic about its future prospects and is continuing to invest in new projects. However, the pressure is on for the company to deliver results and meet its promised targets.
