Tesla reports profit drop on price cuts, lower vehicle sales

FILE – A Model X sports-utility vehicle sits outside a Tesla store in Littleton, Colorado, June 18, 2023. An air quality board has ordered electric car manufacturer Tesla to stop illegally polluting the air in the San Francisco Bay Area. (AP Photo/David Zalubowski, File)

New York, United States — Tesla reported a hefty drop in second-quarter profits Tuesday due to the effect of price cuts while spending aggressively on autonomous driving and other technology.

Elon Musk’s electric vehicle company reported profits of $1.5 billion, down 45 percent, on revenues of $25.5 billion, which were up two percent behind an increase in its energy generation and storage business.

Tesla’s earnings per share missed analyst expectations, while revenues exceeded them.

READ: Tesla sales fall for second straight quarter despite price cuts

The results are the latest in a rough patch for Musk’s electric vehicle titan as it contends with rising competitive pressures that prompted a string of price cuts across leading markets.

Earlier this year, Tesla laid off 10 percent of its global staff, or about 14,000 workers, as part of a push to cull expenses to finance major new investments.

That reorganization also resulted in one-time expenses of $622 million in the second quarter due to severance and other costs, said Chief Financial Officer Vaibhav Taneja.

While vehicle sales fell compared to the year-ago period, they rose from the level in the first quarter as “overall consumer sentiment improved,” Tesla said in its earnings powerpoint.

Although Tesla reaffirmed its expectation that vehicle volume growth may be “notably lower” than last year’s, it said new, more affordable models are set to begin production in the first half of 2025.

READ: Tesla quarterly deliveries drop for the first time in four years

Musk announced the accelerated timeframe in April, winning cheers from Wall Street which had sought fresh offerings.

However, on Tuesday Musk declined to offer new details, saying the topic would be covered in a product launch event.

Tesla said its iconoclastic Cybertruck vehicle remains on track for profitability by the end of 2024 as it ramps up production.

Robotaxi

Tesla vowed to press on with technological pushes in artificial intelligence and autonomous driving.

Earlier this month, the company postponed a much-anticipated robotaxi event planned for August until October.

While the “timing of Robotaxi deployment depends on technological advancement and regulatory approval, we are working vigorously on this opportunity given the outsized potential value,” Tesla said.

The outspoken Musk has a history of making bold predictions about the prospects for autonomous vehicles, saying conventional autos will one day be as obsolete as a horse and buggy.

But Musk has fallen short of projections about the timeframe for self-driving technology, after previously predicting the company would achieve the breakthrough by 2018.

Musk acknowledged his “overly optimistic” prior forecasts but said he expects the robotaxi could achieve full autonomy by the end of 2024, adding “I would be shocked if we cannot do it next year.”

Political uncertainty

The results come as Musk has lately deepened his commitment to electoral politics, coming out loudly for Donald Trump in the 2024 presidential election despite the former president’s longstanding denial of climate change — which has been a professed Musk priority.

Musk formally endorsed Trump on July 13 shortly after an unsuccessful assassination attempt on the Republican presidential nominee.

Musk has agreed to donate $45 million monthly to ‘America PAC,’ a fund focused on electing Trump, starting in July, the Wall Street Journal reported earlier this month.

But the Tesla chief acknowledged that a Trump victory might affect a plan announced in March 2023 to build a new Gigafactory in Mexico, given that the Republican candidate has vowed “heavy” tariffs on Mexican goods.

“I think we need to see just where things stand after the election,” Musk said.

Heading into Tuesday’s earnings announcement, Tesla shares were essentially flat for 2024.

Shares of Tesla fell 6.5 percent in after-hours trading.