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Business News/ Companies / Company Results/  Tesla reports sharp drop in first-quarter earnings
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Tesla reports sharp drop in first-quarter earnings

wsj

The world’s most-valuable automaker is in a more precarious place than it has been in years.

Tesla is in a more precarious place than with demand cooling for electric vehicles industrywide. (Reuters)Premium
Tesla is in a more precarious place than with demand cooling for electric vehicles industrywide. (Reuters)

Tesla’s first-quarter profit plunged as pressure mounts on Chief Executive Elon Musk to better articulate his vision for the electric-car maker’s future.

The Texas-based car company reported net income of $1.1 billion for the January-to-March period, down 55% from the year prior. Revenue fell 9% to $21.3 billion.

The world’s most valuable automaker is in a more precarious place than it has been in years, with its vehicle sales falling, demand cooling for electric vehicles industrywide and Musk placing greater emphasis on developing a fully autonomous car.

The company’s earnings call Tuesday will be Musk’s first formal audience with investors since initiating a restructuring that is expected to reduce the company’s global workforce by more than 10%.

There have been other changes too. Two top executives said earlier this month they were leaving the company, and employees have been told to prioritize a so-called robotaxi, a reshuffling of priorities that has taken the market by surprise.

Many investors had been expecting Tesla to release a more affordable electric car next year that could extend the company’s reach into the mass market. Tesla sells five passenger models—fewer than many other automakers—and earlier this month reported an 8.5% decline in first-quarter deliveries.

On Wall Street, analysts are coming to terms with the idea that Tesla—long valued for its growth potential—may not increase deliveries at all this year.

The company cut prices again in recent days, knocking $2,000 off several models in the U.S., as it confronts stiffening competition in the EV market.

“Tesla’s aging vehicle lineup is already facing considerable demand weakness and price pressure so far, and our sense is that Tesla has now moved into cash preservation mode," Deutsche Bank analyst Emmanuel Rosner wrote in a recent note. The bank downgraded Tesla’s stock and reduced its price target to $123 per share, from $189.

“Without any new vehicle, we feel that Tesla could face more headwinds to growth," Rosner added.

Before the earnings report, Tesla shares had fallen 42% in 2024, closing Tuesday at $144.61.

Meanwhile, Tesla’s board of directors is asking shareholders to re-approve Musk’s 2018 pay package after a Delaware judge struck it down in January, finding the approval process to have been “deeply flawed."

The pay plan, valued at a maximum of $55.8 billion, is the largest ever granted to the CEO of a U.S. public company.

Tesla also is asking shareholders to approve a plan to move the company’s incorporation to Texas, from Delaware. Other Musk companies have reincorporated outside of Delaware after the court’s decision on his pay.

Tesla in January cautioned investors that growth in 2024 might be “notably lower" than it was the previous year. Executives have described Tesla as being between two growth waves: the first driven by its popular Model Y crossover and Model 3 car, and the next to come with the launch of a new generation of vehicles.

The company’s newest model, the difficult-to-make Cybertruck pickup, has gotten off to a slow start since hitting the market late last year.

Investors had been expecting Tesla’s forthcoming vehicles to include both a robotaxi and a more affordable electric car that Musk in January said was likely to enter production in Texas toward the end of 2025.

Since then, however, the CEO has appeared to be increasingly focused on realizing Tesla’s longstanding—and elusive—goal of developing autonomous vehicles. He also has pushed to increase adoption of driver-assistance technology the company calls “Full Self-Driving Capability," which requires driver supervision.

Tesla recently slashed prices for this software, which now costs $8,000 upfront or $99 a month—down from $12,000 or $199 monthly—and allows the car to assume a range of driving tasks. The company also has begun offering U.S. drivers with FSD-capable vehicles a one-month free trial of the technology.

“Not quite betting the company, but going balls to the wall for autonomy is a blindingly obvious move," Musk posted on X last week.

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