Despite the weaker-than-expected first-quarter earnings report, the news that it will accelerate the launch of lower-priced models stimulated Tesla's stock price.
Tesla announced its first-quarter earnings report on April 23, local time, showing first-quarter revenue of $21.3 billion, lower than the expected $22.3 billion, and adjusted earnings per share of $0.45, compared to analysts' previous forecast of $0.52.
However, Tesla said that it will accelerate the launch of lower-priced models. Tesla CEO Elon Musk said on an analyst call that production of lower-priced models will begin in early 2025, if not later this year.
On the day, Tesla closed up 1.85%. However, after the announcement of the earnings report, Tesla's stock price rose sharply after hours, up more than 12% as of press time.
Revenue fell short of expectations, and the launch of low-cost models accelerated
According to the financial report, Tesla's revenue in the first quarter was $21.3 billion, compared to analysts' expectations of $22.3 billion, adjusted earnings per share in the first quarter were $0.45 versus analysts' expectations of $0.52, negative free cash flow in the first quarter was $2.53 billion, analysts expected positive $653.6 million, and operating profit in the first quarter was $1.17 billion, compared to analysts' expectations of $1.53 billion.
Regarding Tesla's first-quarter profit and revenue were both lower than expected, Tesla's CFO said: "The decline in revenue is mainly due to seasonality, inventory is expected to increase in the second quarter, and free cash flow in the first quarter is negative due to the mismatch between production and delivery and AI spending." ”
It is understood that Tesla is not the only company feeling the pinch due to weaker demand. According to Cox Automotive, an auto industry data tracker, the average industry-wide new car inventory in the U.S. rose to 72 days of supply in early April. Tesla's CFO told investors on the conference call that the inventory growth was only a temporary setback. "We expect inventory growth to reverse in the second quarter and free cash flow to return to positive territory," he said. Musk said that if Tesla generates positive cash flow, it is possible to buy back shares.
Tesla said it would accelerate the rollout of more affordable models after a third consecutive quarter of lower-than-expected profits and revenue. Musk said that it is expected that the budget model will be on the market as early as the beginning of 2025, and even advanced to late 2024, "which will be quite fast." The next-generation product line will build on existing production lines and will not require the construction of new factories. ”
Regarding the new model, Tesla said: "This update may result in a lower cost reduction than previously anticipated, but allows us to prudently increase our vehicle sales in a more efficient capital expenditure manner during uncertain times." When Tesla executives were asked when the $25,000 model would be available, executives said, "More details will be presented on August 8." ”
As of the close of local time, Tesla's stock price rose 1.85%, and at one point rose more than 12% after hours. Tesla's stock has plunged 42% so far this year, making it the worst performer among S&P 500 constituents.
Regarding vehicle delivery expectations, Tesla said: "In 2024, our vehicle sales growth rate is likely to be significantly lower than the growth rate in 2023 as our team works to launch the next generation of vehicles and other products. ”
For Tesla, there is both good and bad news for it in the U.S. market. The good news is that Tesla continues to dominate the market share of electric vehicles, and the bad news is that the competition has become more intense over the past two years.
After launching the Model 3 in 2018, Tesla had a market share of 70% to 80% for most quarters until 2022, according to Marklines, which tracks market information for the automotive industry. However, with Ford, Volkswagen, General Motors and Hyundai having consolidated their respective EV market share, each capturing 5% or more by the end of last year, Tesla's EV share fell from 75% in the first quarter of that year to 51% in the fourth quarter of 2023, although none of them have been able to become a strong direct competitor to Tesla alone.
Although Tesla remains the dominant EV maker in the U.S. market, its profits have been under pressure for several quarters in a row. Tesla's first-quarter automotive gross margin, a key measure of profitability, was 16.4%, below Wall Street's expectations of 17.6%. This is a far cry from the 30% peak margin reported in early 2022.
In terms of the Optimus humanoid robot, Musk said: "By the end of this year, the Optimus humanoid robot will have the ability to complete simple factory tasks, and Optimus may be on sale before the end of next year." Musk also said about the development of artificial intelligence: "By the end of 2024, Tesla will have 85,000 NVIDIA H100 GPUs for training artificial intelligence." ”
In addition, Musk also said that he is in talks with a major automaker on the authorization of Full Self-Driving (FSD). Musk said that Tesla is likely to sign an FSD licensing agreement this year, and it will take three years to integrate it into other cars.
Layoffs are accelerating, involving more than 6,000 employees
According to foreign media reports on April 23 local time, Tesla will lay off 6,020 employees in Texas and California.
Last week, under pressure from declining sales and an intensifying price war between electric car makers, Tesla announced more than 10% of its workforce worldwide, but did not say how many employees the layoffs would affect. However, according to the latest report from Bloomberg, Musk initially considered laying off about 20% of his employees.
Tesla had more than 140,000 employees at the end of last year and about 100,000 at the end of 2021, with layoffs in 2018 and 2019 and mass layoffs in 2022 and 2024, according to filings with U.S. regulators.
Under U.S. labor law, companies with 100 or more employees are required to give 60 days' notice before planning a shutdown or mass layoffs. Tesla disclosed some numbers in a notice to Texas and California on Monday,
According to the notice, starting June 14, Tesla will lay off 3,332 employees in California and 2,688 in Texas.
Musk said in a post on his social media platform on April 23 local time. "Tesla has created more than 30,000 manufacturing jobs in California!"
It is understood that layoffs in Texas account for 12% of the total number of employees in the area where Tesla's Gigafactory and headquarters are located.