Tesla’s Profits Plummet 55% in First Quarter Due to EV Price-Cutting Strategy
In a surprising turn of events, Tesla reported a 55% decrease in profits to $1.13 billion in the first quarter compared to the same period last year. The automaker’s protracted strategy of cutting prices on electric vehicles (EVs) has continued to impact its bottom line, leading to a significant drop in earnings.
Despite the disappointing financial results, Tesla’s stock saw a 7% increase immediately after the earnings report was released. The company reported revenue of $21.3 billion in the first quarter, marking an 8.5% decline from the previous year. Analysts had expected earnings of $0.51 per share on $22.15 billion in revenue, falling short of the actual figures.
Tesla attributed its challenges in the first quarter to various factors, including the Red Sea conflict, an arson attack at Gigafactory Berlin, and the gradual ramp-up of the updated Model 3 production in Fremont, California. Additionally, global EV sales have been under pressure as many carmakers prioritize hybrid vehicles over EVs.
Despite experiencing record EV sales in 2023, Tesla’s profits have been impacted by ongoing price cuts that began in late 2022. The company delivered 386,810 vehicles in the first quarter of 2024, a 20% decrease from the previous quarter and an 8.5% decrease from the same period in 2023.
Looking ahead, Tesla had previously announced plans to launch a smaller, more affordable EV priced at around $25,000. However, CEO Elon Musk recently decided to shift focus towards launching a “robotaxi” instead, which is set to be revealed in August. This strategic shift has also led to a restructuring within the company, including a 10% reduction in headcount and the departure of two high-profile executives.
As Tesla navigates these changes, investors and industry experts are eagerly watching to see how the company will adapt to the evolving EV market and maintain its position as a leader in the industry.