Tesla’s profits plummet as the company faces reduced demand – Tesla

Tesla announced the company’s financial results for the first quarter of the year at an extremely difficult time, with sales and the share price recording a downward trend. With that data, Tesla reported $1.1 billion in net income on a total of $21 billion, down 9% from $23.3 billion in the same period last year.

The company’s profits are at a six-year low, a result of the constant reductions in the price of the various models, but also of the decrease in demand. Earlier in the week, the company approved a new price cut for the US, China and Germany, i.e. all three of its biggest markets.

Tesla’s operating margins for the first quarter of the year hovered at 5.5%, down from 11.4% in the same period last year. In a teleconference he had with investors, Elon Musk, the company’s managing director, argued that this is the result of a shift recorded overall in the market, from fully electric to hybrid vehicles.

Nevertheless, Musk said he is confident that electric vehicles will eventually dominate the market.

The quarterly results reflect a downward trend in a number of indicators. Total revenue has fallen by 13% compared to last year. Operating expenses fell by 37%. The net income to be distributed to the holders of common shares decreased by 55%. The company is posting negative cash flows of 2.5 billion, which means that there is no cash left after covering the company’s operating and capital expenses.

The company’s vehicle inventories rose to 28 days, up from 15 days in the previous quarter. This is a significant increase, which demonstrates the difficulties Tesla is facing from the decrease in demand for its products.

Musk has faced pointed questions from investors about those results, as well as recent reports that the company has suspended development of a more affordable electric vehicle, the Model 2, which would theoretically hit the market with a price tag of around 25,000 dollars. Musk reportedly decided to delay this effort, choosing to throw all the company’s energies into the upcoming robotic taxi, which is expected to be presented in August. Investors, on the contrary, had pinned their hopes for a boost to the company’s results in the more economical Model 2.

In the note to investors, Tesla made no explicit reference to the Model 2, limiting itself to “introducing new and more affordable products” in the future.

Musk generally refrained from answering specifically what form these more economical electric vehicles could take, pledging to position himself in more detail during the event for the presentation of the company’s robotic taxi. He touched on various other topics at length, including autonomy, batteries, and even aliens.

Earlier in the year, Tesla reported tepid sales results, a sign that curbing demand and intensifying competition had taken a toll on the company. Tesla announced that it had delivered 386,810 vehicles in the first three months of the year, down 8.6% from the same period in 2023. The company had already predicted a slowdown in growth for 2024 as it prepares to begin the production of new vehicles in 2025.

A short time later, Tesla announced that it would be laying off 10% of its workforce worldwide, approximately 14,000 people. According to a report by Bloomberg, the layoffs could eventually affect up to 20% of the company’s employees.