Tesla Q1 2024 Earnings
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Despite Profit Dip 55%, Tesla's Stock Jumps 13% on Musk's Promise of Affordable EV
Tesla for Q1 2024 reported a 9% YoY revenue decline to $21.3 billion. This marks its first revenue decline since the onset of the COVID-19 pandemic in 2020 and represents the sharpest decline for the world's most valuable automaker since 2012. The decline in revenue was due to the reduced vehicle average selling price (ASP) and decline in vehicle deliveries, partially due to the Model 3 update in the Fremont factory and Giga Berlin production disruptions.
On a segmental revenue basis, Tesla's automotive revenue fell by 13% YoY to $17.38 billion in the first quarter of 2024. Moreover, Energy generation and storage revenue was up by 7% YoY at $1.63 billion. Service and other revenue stood at $2.29 billion.
Net Income for the first quarter plunged by 55% to $1.13 billion as compared to $2.51 billion same period a year ago. The fall in earnings was inevitable when the company said that its revenue would drop 8.5% for the quarter and when Tesla announced its plans to lay off 14,000 people accounting for around 10% of the company's workforce.
The job cuts include approximately 2,000 workers from the company's factory in Fremont, California, and around 2,700 workers in Austin, Texas.
Tesla's operating income for Q1 2024 stood at $1.2 billion marking a 5.5% decline in the operating margins for the quarter. Operating income was primarily impacted by an increase in operating expenses partly driven by AI, cell advancements, and other R&D projects.
The Austin auto carmaker in its earnings call mentioned the company's intention to expedite the introduction of "new vehicles, including more affordable models," which can be manufactured on the existing production lines alongside Tesla's current lineup. Tesla aims to maximize the utilization of its current production capacity and achieve "more than 50% growth over 2023 production" before considering investments in new manufacturing lines.
Additionally, the deck showcased screens of a robotaxi-based ride-hailing service. Despite years of promises, Tesla has yet to deliver on Musk's pledge of a self-driving vehicle.
The affordable lineup includes a model 2 car which is expected to cost approximately $25,000. The new car will use a new generation vehicle underpinning some features of the current models. Moreover, the company said the manufacturing of the new cars will be built on the same manufacturing lines as their current products.
Sales growth within the electric vehicle (EV) sector is decelerating, leading both Tesla and its main competitors to reduce EV prices in an effort to stimulate demand. Tesla experienced an 18% decline in gross profits during the first quarter, attributed in part to price reductions implemented this year.
Following discussions on operational hurdles in the first quarter, such as disruptions in the Red Sea supply chain, Musk expressed optimism during the call, stating, "We think Q2 will be a lot better."
Tesla noted that total sales encompassed revenue from earlier sales of its Full Self-Driving (FSD) option. The introduction of a feature named Autopark in North America enabled the company to recognize deferred revenue.
On April 23 Tesla's stock surged by 13% in the extended trading following CEO Elon Musk's announcement to investors that production of new affordable electric vehicle models could commence earlier than previously anticipated.
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