Tesla profits nosedive 55%: Inside the 'important meeting' that made Musk ditch India visit

Elon Musk-led Tesla reported that its profits have fallen by over 55 per cent at a recent earnings call. The Austin, Texas-based EV maker took a massive hit as dwindling global sales and price reductions eroded both revenue and profit margins, marking a significant decline in its first-quarter net income.

For the period spanning January to March, Tesla’s recorded earnings stood at $1.13 billion, which is significantly less from the $2.51 billion it reported in the corresponding period last year.

Why is Tesla struggling
Tesla’s revenue also witnessed a notable decline, totalling $21.3 billion, which is down 9 per cent compared to the previous year. The decline in worldwide sales is because of an increase in competition and a slowdown in demand for EVs. Tesla also cited challenges such as an arson incident at its German plant and factory downtime during the transition to an updated version of the Model 3 sedan.

Factoring out one-time expenses like stock-based compensation, Tesla’s earnings per share stood at 45 cents, falling short of analyst projections of 49 cents, as per FactSet data.

Moreover, the company’s gross profit margin, representing the percentage of revenue retained after expenses, declined to 17.4 per cent, down from 19.3 per cent a year ago and significantly below the peak of 29.1 per cent reported in the first quarter of 2022.

Despite manufacturing 433,371 vehicles and delivering 386,810 in the first quarter, Tesla continues to grapple with overproduction, as evidenced by the surplus of over 46,000 vehicles. This surplus persists even after price adjustments made last year, slashing prices on select models by as much as $20,000.

In a bid to streamline operations, Tesla recently announced a 10 per cent reduction in its workforce of 140,000 employees, alongside the departure of key executives. Senior vice president of powertrain and energy engineering, Andrew Baglino, with 18 years of service, announced his resignation, adding to the exodus of top talent from the embattled automaker.

How Tesla plans to come out of this situation
While addressing investors on Tuesday, Tesla indicated that its vehicle sales growth might see a notable decline compared to the previous year, because of the ongoing efforts towards the launch of its next-generation vehicle and undisclosed additional products.

Speculation suggests that the upcoming vehicle could be the compact Model 2, which is expected to be priced at around $25,000. The expectation is that this will broaden Tesla’s appeal to mass-market consumers. However, the company’s future plans regarding this vehicle remain uncertain as there have been reports that Tesla might cancel its budget offering.

Tesla is also banking on the development of a fully autonomous Robotaxi as a catalyst for future revenue growth. CEO Elon Musk has hinted at unveiling the Robotaxi on August 8. Reports have also surfaced that the Tesla app is being redesigned to act as an Uber-like ride-hailing app.

Despite a modest uptick of 5.2 per cent in Tesla’s shares following Tuesday’s trading session, the electric carmaker continues to grapple with a significant downturn, with shares plummeting by over 40 per cent since the beginning of the year. In contrast, the S&P 500 index has seen a modest increase of approximately 5 per cent over the same period.

Investors and analysts eagerly await insights from CEO Elon Musk during the earnings conference call scheduled for later on Tuesday, hoping for more detailed explanations regarding Tesla’s performance and future outlook. Many analysts have raised concerns about the decline in sales, which has cast doubts on the underlying demand for Teslas and other electric vehicles in the market. As Tesla navigates through these challenges, all eyes are on Musk for clarity and guidance regarding the company’s path forward.

Top executives leave Tesla at a crucial juncture
Martin Viecha, Tesla’s longstanding Vice President of Investor Relations, has announced his departure from the company after serving for seven years. His exit marks the third high-profile departure from Tesla in less than two weeks, following the resignation of Senior Vice President Drew Baglino and Vice President of Public Policy and Business Development, Rohan Patel.

Baglino, a key figure in Tesla’s engineering and technology development for car batteries, had been with the company for 18 years and was highly regarded by investors and analysts.

Viecha’s announcement came at the end of a first-quarter earnings call. Many are viewing this as a critical moment for the company following its worst quarter in years.

In a statement on X and LinkedIn, Viecha confirmed his departure, revealing that he had informed Musk and Chief Financial Officer Vaibhav Taneja about his decision to retire from investor relations and prioritise spending time with his family. He expressed gratitude for his time at Tesla, describing it as the greatest privilege of his professional life.

While Tesla’s positive earnings call buoyed investor sentiment, with the stock rising over 12 per cent in after-hours trading, Viecha’s departure, along with others, has unsettled some investors. Viecha’s departure is particularly notable as he had developed strong relationships with Tesla’s investors, providing a steady hand amid occasional concerns about Musk’s conduct.

(With inputs from agencies)