Tesla's Q2 Earnings: Profits Miss Estimates, Car Sales Decline Continuously

Tesla's Q2 Earnings: Profits Miss Estimates, Car Sales Decline ContinuouslyOn Tuesday after the market closed, US electric vehicle manufacturer Tesla released its second-quarter earnings for 2024. The report revealed that despite a 2% year-over-year revenue increase to $25

Tesla's Q2 Earnings: Profits Miss Estimates, Car Sales Decline Continuously

On Tuesday after the market closed, US electric vehicle manufacturer Tesla released its second-quarter earnings for 2024. The report revealed that despite a 2% year-over-year revenue increase to $25.5 billion, exceeding analyst expectations, net profit declined by 45% to $1.478 billion, significantly lower than market projections. Tesla's vehicle deliveries also declined for the second consecutive quarter, dropping 5% year-over-year. Following the release, Tesla's stock price fell by over 4% in after-hours trading.

Lackluster Revenue Growth, Steep Decline in Profits

Tesla's second-quarter revenue growth was primarily driven by strong performance in its energy production and storage business, increased Cybertruck deliveries, and higher income from carbon emissions credit sales. Revenue from energy production and storage increased by 100% year-over-year to $3.014 billion. Tesla also generated $890 million in revenue from carbon emissions credit sales, a record high.

However, Tesla's core automotive business delivered disappointing results, with revenue dropping 7% year-over-year to $19.878 billion. This decline was primarily attributed to a decrease in average selling prices per vehicle, increased restructuring costs, and operational expenses related to artificial intelligence projects.

Continuous Decline in Vehicle Sales, Shrinking Market Share

Tesla's electric vehicle deliveries declined by 4.8% in the second quarter compared to the previous year, marking the second consecutive quarter of year-over-year decline. Electric vehicle production dropped by 14% year-over-year. With other automakers continuously launching new electric vehicles, Tesla faces increasingly fierce competition.

According to Cox Automotive, Tesla's market share in the US electric vehicle market fell below 50% for the first time in the second quarter. The decline in Tesla's vehicle sales might be related to Musk's influence. Many of Tesla's longstanding customers and fans are environmentalists and California residents. Data from the California New Car Dealers Association shows a 24% decline in Tesla electric vehicle registrations in California during the second quarter.

Layoffs, Price Cuts, Tesla Seeks "New Growth Points"

To address the decline in deliveries, Tesla has been working diligently to cut costs. In April, Musk announced that Tesla would lay off over 10% of its workforce globally and reduce vehicle sales prices. Tesla also stated that it expects vehicle production to surpass Q2 levels in Q3 and is developing an affordable electric vehicle, slated for production in the first half of 2025.

In search of new growth areas, Tesla is actively investing in artificial intelligence, autonomous driving, and humanoid robots. Musk mentioned that Tesla will launch its new autonomous taxi service later this year and expects to deploy its Optimus humanoid robot in its factories next year. More robots are expected to be delivered to other companies in 2026.

Looking Ahead, Tesla Faces Challenges

Tesla's second-quarter earnings report highlights numerous challenges faced by the company. Continuous declines in vehicle sales, shrinking market share, and decreasing profitability put greater pressure on Tesla and its CEO Elon Musk. Investors expect Tesla to find new avenues for growth and profitability to navigate the increasingly competitive market.

It remains to be seen whether Tesla's new autonomous taxi service and robotics business can quickly catch up and compensate for the weakness in Tesla's automotive business. Several companies, including Google's parent company Alphabet, are developing autonomous taxis but currently offer services in only a few cities.

Tesla needs to overcome its current difficulties and identify new growth areas to maintain its leading position in the electric vehicle sector.

Other Notable Points:

• Tesla's operating profit declined to $1.6 billion in the second quarter, with an operating margin of 6.3%, compared to 9.6% in the corresponding period last year.

• Tesla stated that it expects vehicle production to exceed Q2 levels in Q3.

• Tesla plans to launch an affordable electric vehicle in the first half of 2025.

• Tesla expects to launch its new autonomous taxi service later this year.

• Tesla expects to deploy its Optimus humanoid robot in its factories next year and deliver more robots to other companies in 2026.

Summary:

Tesla's second-quarter earnings report reveals that the company is facing significant challenges. Continuous declines in vehicle sales, decreasing profitability, and shrinking market share have raised concerns among investors about Tesla's future growth potential. Tesla needs to find new growth areas to maintain its leading position in the electric vehicle sector.

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