Tesla (TSLA) reported a 9% decline in revenue for the first quarter, the largest drop since 2012, falling below analysts’ expectations, as the electric car company grapples with ongoing price cuts.
Tesla CEO Elon Musk told investors that production of the new affordable electric vehicle model may start earlier than expected, leading to a significant surge in Tesla’s stock price in after-hours trading.
The drop in sales was even greater than the company’s last decline in 2020, which was due to production disruptions during the pandemic. Tesla’s automotive revenue fell by 13% year-over-year to $17.38 billion in the first three months of 2024.
During the earnings call, Musk stated that the company plans to start production of the new model “by early 2025, if not late this year,” earlier than previously anticipated to begin in the second half of 2025. Musk also touted Tesla’s investments in artificial intelligence infrastructure and mentioned negotiations with “a major automaker” to license its Full Self-Driving (FSD) system, marketed in the US as “Full Self-Driving.”
Tesla reiterated its pessimistic outlook for 2024, telling investors that “sales growth rates may be significantly lower than in 2023.”
Before surging 13% in after-hours trading, Tesla’s stock had fallen by over 40% this year to its lowest level since January 2023, amid concerns about delivery shortfalls, among other issues. Earlier this month, Tesla reported an 8.5% year-over-year decline in vehicle deliveries for the first quarter.
The company stated that it is accelerating the introduction of “new vehicle models, including more affordable ones,” which will “be produced on the same production lines as Tesla’s existing product line.” Tesla aims to “fully utilize” its current capacity and achieve “more than 50% growth in output compared to 2023” before investing in new production lines.
Sales growth in electric vehicles is slowing, and Tesla’s first-quarter gross profit plummeted by 18%, partly due to this year’s price cuts.
Chris Redl, an automotive analyst at Siena Capital, estimated that Tesla’s deferred revenue from FSD for the quarter amounted to as much as $700 million. This is approximately 4.3% of Tesla’s automotive revenue after deducting regulatory credits.
Tesla began a significant restructuring this month, with two executives, Drew Baglino and Rohan Patel, resigning. Musk stated in a company-wide memo last week that Tesla will cut over 10% of its global workforce.
Revenue from Tesla’s energy division increased by 7% to $1.64 billion compared to the same period last year, while services and other revenue grew by 25% to $2.29 billion.
During the earnings call, Musk was asked whether he plans to leave Tesla, given his various roles, including leading SpaceX and other ventures. Musk did not provide a direct answer but indicated that he works most of the time, rarely taking Sundays off, and will strive to ensure Tesla “thrives very well.”