Tesla records lowest profit margin for five years | BBC News

Summary

Tesla reported its lowest profit margin in over five years, driven by price cuts to compete with rivals like Rivian and legacy automakers. CEO Elon Musk still aims for self-driving cars to operate without human oversight by next year, but Tesla's Q2 profit fell 45%, missing Wall Street expectations. Investors are concerned about Tesla's lack of concrete guidance on AI ambitions and vehicle sales. Competition is growing, particularly in China, with rivals producing more affordable electric vehicles. Meanwhile, other automakers like General Motors have made strides in their EV production, gaining market traction.

Takeaways

• 🚗 Tesla has reported its lowest profit margin in over five years, missing Wall Street expectations.
• 💰 The company has been cutting prices to remain competitive, leading to reduced profits.
• 📉 Tesla’s production and sales have both fallen, contributing to a 45% drop in profit in the second quarter.
• 📈 Despite the challenges, Tesla's shares gained 40% between May and July as investors shifted focus toward its AI ambitions.
• 🤖 CEO Elon Musk claims Tesla’s self-driving cars could operate without human supervision by next year, although similar promises have been made before.
• ⚡ Tesla aims to become an AI powerhouse with its robo-taxis and humanoid robots, though these ventures are not yet profitable.
• 🏎️ Competition from traditional carmakers and lower-priced EVs is increasing, especially in China and Europe.
• 🛑 Investors are cautious as Tesla has not provided concrete guidance or tangible progress in its AI and self-driving projects.
• 💼 Tesla's move to Austin and the approval of Musk's massive pay package show confidence in his leadership, despite current profit challenges.
• 🔋 Legacy automakers like General Motors are also investing heavily in EVs and seeing success, posing more competition to Tesla.

Q & A

What are the main reasons for Tesla's profit margin drop in recent months?

Tesla's profit margin drop is mainly due to price cuts made to compete with rivals, production and shipping delays, increased competition from overseas electric vehicle makers, and lagging sales.

How much did Tesla's profit decline between April and June?

Tesla reported a 45% drop in profit between April and June.

How did Tesla's shares perform prior to the earnings report, and why?

Tesla shares had been up 40% since the end of May because investors shifted their focus from Tesla’s declining EV sales to CEO Elon Musk's plans to expand Tesla into artificial intelligence with AI-powered robo-taxis and humanoid robots.

What was the market reaction to Tesla's second-quarter earnings report?

Tesla's shares dropped by 8% in after-hours trading, partly due to missing earnings per share expectations and the lack of concrete guidance from the company.

What concerns do investors have about Tesla's AI promises?

Investors are skeptical because Tesla has repeatedly claimed that self-driving technology will be ready within a year, but tangible progress has yet to materialize, causing some investors to wait before fully committing to Tesla as an AI-driven company.

How is the global EV market impacting Tesla's performance?

Tesla is facing increased competition in the EV market, especially from Chinese EV manufacturers exporting to Europe, leading to price wars and making Tesla's vehicles a higher-priced option compared to more affordable EVs with similar specifications.

What are the implications of Tesla's focus on luxury vehicles amid growing competition?

Tesla’s focus on luxury vehicles puts it at a disadvantage as more affordable EVs with comparable specs become available, making Tesla’s higher price point less appealing to a broader range of consumers.

What were some significant recent developments for Tesla that affected investors?

Recent developments include Tesla moving its base to Austin and approving a massive pay deal for Elon Musk, both of which were overwhelmingly supported by Tesla’s investors.

What are investors’ long-term views on Elon Musk’s leadership?

Tesla investors who are in it for the long term still back Elon Musk’s leadership and vision, as they believe in his ability to grow the company from where it started to becoming a profitable automaker.

How are traditional automakers like General Motors competing in the EV market?

General Motors has been investing in EVs for years and is launching multiple electric vehicles across various price points, with growing production and strong consumer uptake.