Tesla’s second quarter profit dropped 45 percent compared to a year earlier as global electric car sales continued their decline despite price reductions and low-interest finance.
The Texas-based firm said Tuesday that its net income from April to the end of the June period was $1.48billion, compared with $2.7billion in the same time frame a year earlier. This is the second consecutive quarterly profit decrease.
FactSet reports that Tesla’s second-quarter revenues grew 2 percent to $25.5 billion. This is a significant increase compared to the $24.54 billion Wall Street estimate.
Musk opted to delay the development of a new Tesla cheaper model for a three-month period in order to focus on developing self-driving cars. In response to slowing sales and increasing competition, the company laid off over 10 percent of its staff. This cost them more than $350 millions.
The electric carmaker reported that its profit was lower in part due to “an increase in operating costs largely driven through AI projects” as well as “restructuring fees”.
Tesla announced this month that it sold 443 956 vehicles in the second-quarter, a decrease of 4.8% from the 466 140 sold a year earlier. The sales, although better than analysts’ expectations of 436,000 units, still show a weakening in demand for the company’s aging product lineup.
Tesla’s earnings report stated: “Plans to produce new cars, including more affordable ones, are on track for the start of production in 2025.
Musk predicted that Tesla would sell more than 1.8 millions vehicles in the entire year. However, the company has only sold 831,000 cars worldwide for the first half.
The gross profit margin of the company, which is the percentage revenue that it keeps after expenses, has fallen to 18%. It was 18.2% a year ago, and peaked at 29,1% in the first quarter 2022.
Tesla reported record quarterly revenues “despite a challenging operating environment”. Tesla’s energy storage business generated just over $3 billion, which is double what it did in the same time period last year.
Tesla shares were down 3.5 percent, or $8.40 in after-hours Wall Street trading. They closed at $238.01. The stock has lost 8.4 percent in the last year, but it’s been significantly reduced.
Musk, 53 years old, co-founder and CEO of the financial technology firm PayPal was an early Tesla investor. Musk joined the board in 2004, and became CEO in 2008. This was the year that Tesla launched its first electric vehicle, the Roadster.
He is also the CEO of SpaceX – a spacecraft manufacturer and designer – as well as X – the social media platform formerly called Twitter – which he purchased in 2022 for $ 44 billion. He also owns Neuralink and the Boring Company. Both are ventures that aim to implant microchips into the brain.
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