Tesla stock falls 8% as growing competition squeezes profits

Tesla shares dropped more than 8% in premarket trading on Wednesday after Elon Musk’s electric car maker reported its second straight quarterly loss — stoking concerns that rising competition is denting sales and margins.

The Austin, Texas-based company said on Tuesday that it generated 7% less automotive revenue year-over-year in the three-month period that ended in late June.

Tesla also reported its lowest profit margin in more than five years after slashing prices in hopes of reviving sagging demand for electric-powered cars.

“There were quite a few competitor vehicles hitting the market, which haven’t done very well, but they have discounted these vehicles very heavily,” Musk said on a conference call with analysts. 

The company’s widely watched gross profit margin, the percentage of revenue it gets to keep after expenses, fell to 18%. A year ago it was 18.2%, and it peaked at 29.1% in the first quarter of 2022.

Margins fell despite Tesla’s laying off 14% of its global workforce this year — equal to more than 19,000 jobs. The company also saw an exodus of top executives after Musk gutted the team in charge of Tesla’s Supercharger unit.

Musk’s company has been hamstrung by slowing sales worldwide as well as growing competition from Chinese EV makers including the Warren Buffett-backed BYD.

On the late Tuesday conference call, Musk said Tesla will unveil its long-anticipated robotaxi in early October, two months later than originally planned. He said the extra time would allow it to improve the robotaxi design and prepare some other items to reveal at the event. 

Musk also said Tesla is on track to start production of a new, affordable car model in early 2025. This spring, he had said a launch later this year was a possibility.

Musk also said Tesla will delay decision on whether to build a plant in Mexico until after the presidential election, noting that Trump has pledged to impose “heavy tariffs” on cars produced in Mexico.

“It doesn’t make sense to invest a lot in Mexico if that is going to be the case,” Musk said.

Tesla’s second-quarter net income fell 45% compared with a year ago as the company said on Tuesday that it made $1.48 billion from April through June, less than the $2.7 billion it made in the same period of 2023.

Despite the earnings miss, Tesla bulls on Wall Street said they are playing the long game in anticipation that the company will see its stock surge once it rolls out its Robotaxi technology.

“I’m still in the camp that they’re going to deliver on these,” Gene Munster, managing partner at Deepwater Asset Management, told CNBC on Tuesday.

“They won’t deliver it on time, but ultimately, no other car company is doing what Tesla is doing, and I think this is still going to move higher.”

The quarter’s overall revenue rose 2% to $25.5 billion, beating Wall Street estimates of $24.54 billion, according to FactSet.

That was because of revenue from sales of regulatory credits, which help rivals meet emissions standards. Tesla sold $890 million worth in the quarter, triple what it sold a year ago.

Excluding one time items, Tesla made 52 cents per share, below analyst expectations of 61 cents.

Tesla shares had been down more than 40% earlier in the year, but have since recovered most of the losses.

Earlier this month Tesla said it sold 443,956 vehicles from April through June, down 4.8% from 466,140 sold the same period a year ago.

Although the sales were better than the 436,000 that analysts had expected, they still were a sign of weakening demand for the company’s aging product lineup.

For the first half of the year, Tesla has sold about 831,000 vehicles worldwide, far short of the more than 1.8 million for the full year that Musk has predicted.

Tesla said it posted record quarterly revenue “despite a difficult operating environment.”

The company’s energy-storage business took in just over $3 billion in revenue, double the amount in the same period last year.

Munster said he was optimistic about the potential of Tesla’s self-driving software as well as Optimus, the humanoid robot.

“There are other companies that are $3 trillion market caps — I think Tesla can be in that league,” he said.

“Today is not the day to be thinking about this, with these ugly margins, but I think the company is firmly on track with where the world is going.”

With Post wires