Tesla profits drop 55% in Q1

Tesla has reported a 55% decline in profits to USD 1.13 billion for the first quarter (Q1), marked by a lengthy electric vehicle (EV) price-cutting strategy and various obstacles affecting the automaker's financial performance.

The company's revenue for the quarter stood at USD 21.3 billion, which is a 9% decrease compared to the same period in 2023. Analysts surveyed by Yahoo Finance had anticipated earnings of USD 0.51 per share on revenue of USD 22.15 billion. Tesla's operating income also witnessed a significant decline of 54%, amounting to USD 1.2 billion for the quarter.

In its Q1 earnings report, Tesla highlighted several challenges encountered during the period, including the impact of the Red Sea conflict and an arson attack at Gigafactory Berlin. Additionally, the gradual production ramp-up of the updated Model 3 at the Fremont, California factory posed further operational struggles. The company noted that global EV sales remained under pressure as many automakers prioritised hybrids over electric vehicles, resulting in reduced demand.

Amidst this decline, Tesla secured USD 442 million in zero emissions tax credits during the first quarter, as other automakers continued to purchase regulatory credits due to the hybrid approach.

During the earnings call, Tesla CEO Elon Musk addressed the broader automotive landscape, expressing a belief that electric vehicles will ultimately dominate the market despite current challenges.

Following the release of the Q1 results, Tesla's shares surged by up to 12%, reflecting investor optimism around the company's forward-looking strategies.

Despite a decline in profits, Tesla remains committed to advancing its technological capabilities, particularly in artificial intelligence (AI) for autonomous driving. The company allocated USD 1.1 billion to research and development (R&D) during the first quarter, marking a 49% increase compared to the same period in 2023.

Tesla's financial performance has been impacted by ongoing price adjustments, which began in late 2022 to stimulate sales. Although these measures initially boosted demand, Tesla delivered 20% fewer vehicles in Q1 2024 compared to the previous quarter. Furthermore, automotive gross margins, excluding regulatory credits, contracted to 16.35% from 18.96% in the same period last year.