Tesla reported earnings after the bell, showing a record for quarterly revenue but lower margins thanks to price cuts and incentives.
The stock price remained flat after the initial report, but began dropping during the earnings call as CEO Elon Musk and other executives failed to deliver precise specs and start of delivery dates for the Cybertruck, and for a robotaxi-ready vehicle. Musk and other execs also said during the call that vehicle production would slow down during Q3 due to shutdowns for factory improvements. It’s now down about 5% after hours.
Net income (GAAP) was $2.70 billion, an increase of 20% from last year. Operating income, however, was off 3% from the year-ago quarter at $2.40 billion.
By way of comparison, during the first quarter of 2023, Tesla reported net income of $2.51 billion on revenue of $23.33 billion. During the second quarter last year, Tesla reported net income of $2.27 billion on $16.93 billion in revenue.
On the company’s earnings call, Musk said, “We continue to target 1.8 million vehicle deliveries this year, but expect Q3 production will be a little bit down because we’ve got summer shutdowns for a lot of factory upgrades.”
Operating profit margins dipped below 10% for the first time since the first quarter of 2021. Operating profit margins came in at 14.6% in the second quarter of 2022. Lower vehicle prices, higher costs for battery production, and a weaker U.S. dollar were responsible for the margin drop.
The average price of a Tesla vehicle in the second quarter came in at just over $45,000, down a touch from the first quarter and down from almost $56,000 in the second quarter of 2022.
Lower profitability isn’t great news but results were still solid. CFRA analyst Garrett Nelson called the release uneventful in a Wednesday report. He rates shares Buy and has a $325 price target for the stock.
Shares closed at $291.26, down 0.7% in regular trading while the S&P 500 closed up 0.2%. The Nasdaq Composite was flat. “The challenges of these uncertain times are not over, but we believe we have the right ingredients for the long-term success,” the company’s earnings statement said.
The company said that it still plans to be able sell 1.8 million vehicles this year, which would be 37% from 2022’s total.
It did warn that its third quarter production would be down due to scheduled summer shutdowns of its assembly lines. It said it needed to do so to make upgrades at its factories.
CEO Elon Musk disclosed in a call with investors that the company is in “early” discussions with another major automaker to license it “full self-driving” (FSD) technology.
Virtually all major automakers are introducing driver assist options, such as technology to keep cars at a safe distance from the cars in front of it them and automatic breaking to avoid obstacles. But Tesla has been most aggressive in claiming that it has technology to allow cars to essentially drive themselves, even if drivers are required to stay alert in the driver’s seat. Tesla charges drivers $15,000 for their cars to have the FSD capabilities.
But there have been numerous Tesla vehicles that have had accidents, including hitting emergency vehicles at the scene of other accidents, while in FSD mode. In February the company recalled all 363,000 US vehicles with its FSD software after the National Highway Traffic Safety Administration found that it “led to an unreasonable risk to motor vehicle safety based on insufficient adherence to traffic safety laws.”
Musk continued to insist on the Wednesday call that cars in FSD mode are already safer than human-driven automobiles. He said FSD keeps getting better because it has so much data collected from cars being driven in FSD mode. He said so far 300 million miles have been driven in FSD.
“That 300 million-mile number is going to seem small very quickly. It will soon be billions of miles and tens of billions of miles,” he said. “And that FSD will go from — from being as good as a human to then being vastly better than a human. We see a clear path to full self-driving being 10x safer than the average human driver.”
But Musk admitted on the call that his predictions on the capability of Tesla’s FSD mode have not been achieved.
“I’m the boy who cried FSD. But I think we’ll be better than humans by the end of this year. That’s not to say we’ll be approved by regulators,” he said. “I’ve been wrong in the past. I may be wrong this time.”
Shares of Tesla fell about 2% in after-hours trading, after closing down 1% on the day ahead of the report. Shares are up 136% so far this year through Wednesday’s close, a dramatic turnaround from the 65% drop in value last year.
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