Elon Musk, co-founder of Tesla and SpaceX and owner of X Holdings Corp., speaks at the Milken Institute Global Conference at the Beverly Hilton Hotel on May 6, 2024 in Beverly Hills, California.
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as Tesla CEO Musk While it continues to make lofty promises about its company’s future in autonomous driving and robotics, investors are concerned about deteriorating margins.
Missing Wall Street estimates Second quarter financial report On Tuesday, Tesla said its adjusted operating margin fell to its lowest level in three years, falling to 14.4% from 18.7% a year ago. This is the fourth consecutive quarter of contraction.
The company reported net income of just $1.48 billion on revenue of $25.5 billion, including $890 million in regulatory credits.
Tesla is being hit from both sides. As the company’s spending on artificial intelligence infrastructure soars, Musk says it’s needed to transform Tesla electric vehicles into self-driving vehicles and develop humanoid robots that can do things like factory work.
at the same time, delivery Sales of Tesla’s most popular electric cars have been declining this year, and the company has responded by slashing prices and offering other incentives such as low-interest loans.
“Affordability remains a top concern for customers,” Vaibhav Taneja, Tesla’s chief accounting officer, said on the company’s earnings call. “In response, we offered attractive financing options in the second quarter to offset continued High interest rates.”
Tesla shares fell about 8% to $227.23 in after-hours trading on Tuesday. As of closing, the index was down less than 1% for the year, while the Nasdaq was up 20% over the same period.
Tesla said in a statement investor deck The decline in operating income was partly due to lower average selling prices and lower deliveries of top-tier electric vehicles. Automotive revenue fell 7% annually, the second consecutive decline, due to increased competition, especially in China.
Tesla began offering five-year, zero-interest loans in April to spur sales of its electric cars in China. The deal was originally scheduled to last until the end of July, but the company extended its offer again on Tuesday, according to a person familiar with the matter. Report From Shanghai electric vehicle news website CnEVPost.
The company launched a similar deal in Germany, home to Tesla’s only European car factory. These offers include 0% financing for four years for buyers of the new Model Y Long Range All-Wheel Drive this season.
In May this year, Tesla provided financing agreements with annual interest rates of 0.99% for some Model Y purchases in the United States, with terms ranging from three to six years.
“We now offer very competitive financing rates in most parts of the world,” Taneja said. “This is the best time to buy a Tesla. I mean, if you’re on the fence, come out and pick up the car.”
The Guggenheim Museum’s Ronald Jewkov recommends selling Tesla stock in a note titled “Do Earnings Matter?” ahead of Tuesday’s earnings report. In the report, he predicted that the company’s auto gross margin would be lower than expected “driven by massive discounting operations.”
“Work harder in the dojo”
While Tesla believes the EV market is more competitive than in the past, it’s also working hard to move into the future and catch up with companies like this alphabetical Waymo is in the robotaxi market. In addition to the huge investment in autonomous driving, there is also the Optimus humanoid robot project, which Musk said will eventually make Tesla a valuable company billions of dollars.
These efforts require building information Center Filled with Graphics Processing Units (GPUs) Nvidia and an artificial intelligence processor independently developed by Tesla. Tesla’s second-quarter operating expenses soared 39% from the same period last year to $2.97 billion. Capital spending on artificial intelligence infrastructure reached $600 million in the quarter.
Musk said on the conference call that the company will “increase efforts to develop the supercomputer Dojo” “to compete with Nvidia.”
Musk previously pledged to spend $500 million to build a Dojo supercomputer in Buffalo, New York. The company is currently building a wing of the facility in Austin, Texas, to house the data center.
“I think we have no choice because the demand for Nvidia is so high and obviously they have an obligation to raise the price of GPUs to a level that the market will bear, which is very high,” Musk said. “So I think we really have to make Dojo work, and we will.”
For investors concerned about profit margins, this all sounds ominous. But Musk reiterated on Tuesday that shareholders focused on short-term results are the wrong company for the company. He described the current problem as “noise.”
Musk said Tesla will hold a robotaxi launch event on October 10, two months later than originally planned. He said he would be “shocked” if Tesla didn’t offer self-driving services next year. In addition to the “CyberCab”, Musk has promised for years that Tesla would transform customers’ existing electric vehicles into self-driving vehicles through software updates.
The updates will add functionality and improve the functionality of its driver assistance software, which is currently marketed as “Full Self-Driving Supervision.” Tesla also has a new AI5 hardware component it needs to add to its electric vehicles to turn them into self-driving vehicles that don’t require humans to be ready to steer or brake at all times.
“I’ve said it before on these calls – the value of Tesla is overwhelmingly autonomy,” Musk said. “These other things are an annoyance relative to self-driving. So I would suggest that anyone who doesn’t believe Tesla is going to solve the problem of self-driving vehicles shouldn’t own Tesla stock.”
watch: Tesla has a lot to prove
