BENGALURU/SAN FRANCISCO – Tesla’s recent report reveals the worst Tesla profit margins in more than five years and missed Wall Street earnings targets in the second quarter, as the electric vehicle maker cut prices to revive demand while it increased spending on artificial intelligence (AI) projects.
The company said it was on track to produce new vehicles, including more affordable models, in the first half of 2025, although the models will result in achieving less cost reduction than previously expected. Shares fell 7 per cent in after-hours trade. #TeslaProfitMargins
“Perhaps more than ever in the company’s recent history, Tesla’s investors need results; those will have to come fast – both for the humanoid robot and for the Robotaxi,” said Investing.com senior analyst Thomas Monteiro.
The second quarter was tumultuous, with Tesla’s chief executive officer Elon Musk shelving development of an all-new cheaper car in favour of less ambitious lower-cost models and working on creating self-driving taxis, helping to boost shares.
The company also laid off more than 10 per cent of its employees to cut costs, and Tesla said profit was also weighed down by an increase in operating expenses largely driven by AI projects and restructuring charges. #TeslaProfitMargins
Tesla recorded automotive gross margin excluding regulatory credits of 14.65 per cent in the second quarter, compared with estimates of 16.29 per cent, according to 20 analysts polled by Visible Alpha.
Moreover, Tesla’s decision to cut prices aimed to boost demand but negatively impacted Tesla profit margins. Increased investment in artificial intelligence projects further pressured financial performance. Consequently, these factors combined to drive the lowest profit margins in years.
