Author丨Zheng Zhiwen
Editor丨Zhang Mingxin
Source丨Xinhua News Agency
On April 23, local time, Tesla released its financial report for the first quarter of 2024. During the reporting period, Tesla's performance fell short of expectations, but the U.S. stock price rose about 13% after hours, why?
Specifically, Tesla's total revenue in the first quarter reached $21.301 billion, a year-on-year decrease of 9%, which is the first year-on-year decline in Tesla's revenue since the beginning of 2020, and the largest decline in 12 years. Among them, Tesla's main business automobile revenue fell 13% year-on-year to $17.378 billion. Tesla said that the revenue was affected by the decline in average selling prices and the decline in vehicle deliveries in the quarter.
A few days ago, Tesla's latest global production and delivery report showed that in the first quarter of 2024, Tesla produced 433371 electric vehicles, a year-on-year decrease of 1.7%, and delivered 386,810 electric vehicles, a year-on-year decrease of 8.5%, far less than Wall Street's expectations. Tesla said that the decline in sales was due to the fact that the refreshed Model 3 was in the early stages of production at the Fremont plant, and the Red Sea crisis caused the diversion of shipping and the suspension of production due to arson damage at the German factory. However, the fact that the supply of electric vehicles exceeded demand in the first quarter could not hide the lack of growth in Tesla's main business.
During the same period, Tesla's GAAP gross margin was 17.4%, down 1.99 percentage points year-over-year, GAAP net profit was $1.129 billion, down 55% year-over-year, and adjusted earnings per share fell to $0.45 from $0.85 in the year-ago quarter, below Wall Street's expectations of $0.50 and the lowest level in ten quarters. At the same time, Tesla's free cash flow turned negative in the first quarter, from $2.06 billion at the end of the previous quarter to -$2.53 billion in the current quarter. The company attributed the turnaround to a $2.7 billion inventory backlog and a $1 billion "AI infrastructure" capital expenditure.
Despite the performance falling short of expectations, Tesla's stock price still rose more than 12% before the U.S. stock market opened on April 24. This market confidence comes from Tesla's expectation that it will accelerate the launch of cheaper economy models, "fighting back" against rumors that the Model 2 was canceled some time ago.
Tesla CEO Elon Musk pointed out on the first-quarter earnings call that Tesla will continue to update its vehicle lineup and accelerate the launch of new models, and some production plans originally scheduled for the second half of 2025 may be advanced to early 2025 or even the end of 2024, including cheaper models, which will form a strong combination with existing models. The new model will utilize the next-generation platform and current platform technology and will be able to be produced on the same production line as the existing model.
Some analysts have pointed out that the more affordable Tesla entry-level model is seen as the key to realizing Musk's sales growth ambitions. Musk said in 2020 that Tesla wants to sell 20 million cars a year by 2030, double the current sales of Toyota, the world's largest automaker.
Save sales
At present, the slowdown in demand for electric vehicles, the macro environment of high interest rates, and the intensification of market competition have made Tesla's predicament more severe than expected. Tesla recently said that the growth rate of car sales in 2024 may be significantly lower than in 2023.
Previously, Morgan Stanley analyst Adam Jonas lowered Tesla's full-year deliveries this year from 1.998 million to 1.954 million. American brokerage Bernstein said that Tesla's growth has stagnated, and there is no obvious catalyst to stimulate its future growth. Bernstein lowered Tesla's production forecast for this year to 1.98 million units, lower than the consensus forecast of 2.06 million units, and expects Tesla to maintain weak growth momentum until the end of 2025.
In order to boost global sales, Tesla has recently frequently staged the usual drama of "price reduction-price increase-price reduction". Taking the Chinese market as an example, since the beginning of this year, Tesla China has started to cut prices, but with the intensification of the "price war", too many brands in the same price range have been eyeing Tesla's market share through the way of "volume price" and "volume value", while Tesla, which has a long product replacement cycle and a relatively solid product matrix, is becoming more and more difficult to boost sales through the price reduction effect.
In order to stimulate sales in the first quarter, Tesla officially released the news that it would increase prices on April 1 in late March, creating anxiety to "force orders", but it had little effect on the retail side. Tesla delivered 132,800 vehicles in China in the first quarter of this year, compared with 137,400 units in the same period last year, a year-on-year decline of about 3.3%. At that time, Wells Fargo analysts warned that the demand for electric vehicles would slow this year, which could force Tesla to implement larger price cuts for its products, which means that Tesla may continue to cut prices after the price increase on April 1. Sure enough, on April 21, Tesla China announced a price cut of 14,000 yuan for all Model 3, Y, S, and X models.
As early as the beginning of April, Tesla began to launch the loan benefits of "3 years with 0 interest" and "official replacement with 5 years with 0 interest", and on April 24, Tesla China once again lowered the purchase threshold and launched a blockbuster benefit of "0 down payment and ultra-low interest" for the current car of the designated version of Model 3/Y.
In addition, Deutsche Bank analyst Emmanuel Rosner wrote in a recent note, "Tesla's aging car lineup has so far faced some degree of weak demand and price pressure, and we believe Tesla has now entered cash-saving mode." Without any new vehicles, we think Tesla could face more headwinds for growth. ”
It is undeniable that Tesla's sales bottleneck is due to the weak growth of its existing main models, the slow ramp-up of production capacity of the Cybertruck, and the slow progress of new models. Musk said earlier this year that Tesla was in between two major growth waves. The first wave of growth was driven by the introduction of the Model 3 sedan and Model Y sport utility electric vehicles, while the next wave of growth is expected to come from the upcoming Model 2 model, priced at around $25,000.
But Wells Fargo noted that the upcoming Model 2 is unlikely to reassure investors, as its more affordable price means lower profitability, plus there is still a long wait.
Seek new growth poles
In the face of sluggish growth, Musk, who claimed to "hate" layoffs, also reluctantly cut his love.
On April 15, Musk sent a letter to all Tesla employees, announcing that the company would lay off 10% of its employees worldwide. As of December 31, 2023, Tesla has a total of 140473 employees worldwide, and a 10% layoff means that 14,000 people will be affected.
Dan Ives, a prominent Tesla bull at Wedbush Securities, warned that the layoffs are an ominous sign for Tesla, indicating a tough time ahead. He noted that "global demand has been weak, and unfortunately, this is a necessary move for Tesla to cut costs amid a weak growth outlook." ”
"As we prepare for the next phase of the company's growth, it's extremely important to look at every aspect of the company in order to reduce costs and increase productivity," Musk noted in an internal letter. ”
A Tesla China employee told the 21st Century Business Herald reporter that Tesla China's sales, delivery, after-sales and other positions are the hardest hit areas by the layoffs, and some departments have a layoff rate of up to 40%, and the above positions claim to be no longer recruiting. According to the latest news, Tesla (Shanghai) has withdrawn the offers of all fresh graduates and will be compensated for the monthly salary of one month.
Some netizens said that they were non-fresh graduates, and their social recruitment was also canceled by Tesla.
An insider revealed to the 21st Century Business Herald reporter that Tesla's layoffs are actually a key manifestation of shifting its business focus to the field of artificial intelligence and robotics. "Electric vehicles are only the carrier of Tesla's business, and its essence is to break the original industrial division of labor, integrate key technologies in the fields of electric vehicles, energy storage products, artificial intelligence (AI) and robotics, and form a closed loop of software and hardware integration. ”
The person also pointed out that Tesla has gathered the three key elements of large-scale mileage, computing platform, and huge computing power to achieve FSD. Regardless of which of these three elements requires long-term and large resource investment, Tesla needs to maintain high-speed iteration and flexible collaboration to pave the way for a new growth cycle.
In addition, during this earnings call, Musk dismissed the idea that hybrid cars are the future of the automotive industry. Musk acknowledged that electric vehicles are under global pressure, and competitors are opting for hybrid vehicles. But he reiterated Tesla's belief that electric vehicles will eventually dominate the market.
At the same time, Musk emphasized the importance of smart car technology, saying that every car must integrate these features, otherwise no one will buy it. He said Tesla has been investing in the hardware and software ecosystem needed to enable autonomous vehicles and ride-hailing services, and said it will continue to invest in core AI infrastructure in the coming months.
A few days ago, Tesla lowered the price of FSD and began offering a one-month free trial of the technology to U.S. drivers with FSD-enabled vehicles.
Musk stressed that "the future is not only electric, but also autonomous." We believe that autonomous driving at scale is only possible through data from millions of cars and huge AI training clusters. We already have and continue to expand both. ”
(Some of the information is from public information)
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Editor: Liu Xueying, intern: Li Jie
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