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Tesla’s electric car sales were again lower than in the previous quarter. Company boss Elon Musk can still keep investors happy with the prospects of self-driving taxis and humanoid robots. But how long?
Elon Musk faces a difficult task at Tesla.
Tesla investors don’t just live on bread, they live on every word that comes out of Elon’s mouth: This has been the guide for investors who invested in the American electric car company.
Indeed, their faith has been handsomely rewarded so far. Anyone who bought Tesla shares five years ago and held on to them today has increased their holdings by more than 15 times.
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But now Musk’s disciples’ faith is being severely tested. On Tuesday afternoon, US time, Tesla once again released poor quarterly data. The automaker’s sales increased by 2.2% from the previous year to $25.5 billion.
However, the growth was mainly due to Tesla’s battery and energy divisions. Elon Musk owes about $890 million to the Biden administration he hates: other automakers produce too many gas-guzzling cars and therefore produce carbon dioxide2If the quota is exceeded, Tesla must purchase emission rights.
Including car sales, Tesla achieved sales of just $19.9 billion – $21.6 billion the previous year. Quarterly profit fell to $1.5 billion (previous year: $2.7 billion), thus still falling short of investors’ rather modest expectations.
The bad news hit investors shortly after the market closed. In after-hours trading, Tesla’s stock price, which had already depreciated during official trading hours, fell nearly 8%. But it is still up sharply from the beginning of June.
Tesla’s lead is melting
Tesla is fighting a battle on multiple fronts. In the United States, electric vehicle sales are expected to grow only slowly through 2024; at least slower than industry experts had predicted. And for many Americans, electric vehicles are still too expensive compared with traditional internal combustion engines.
Additionally, Tesla has lost market share to competition in its long-dominated domestic market. According to data from auto marketer Cox Automotive In the second quarter of 2024, Tesla sales accounted for less than half of all electric vehicles for the first time. Domestic and foreign automakers from China and Europe launched a fierce price war.
Although Tesla has also lowered the price of its cars in many places, it still can’t stop customers from turning to the competition. At the same time, the price cuts have caused Tesla’s long-proud operating profit margin to shrink from 9.6% to 6.3%. It is necessary to pay attention to manufacturing costs. The automaker announced that it would cut more than one-tenth of its employees worldwide. This may support Tesla’s profitability, but it will not happen overnight.
In particular, Chinese automakers, led by BYD, have put considerable pressure on Tesla. In China, by far the most important electric vehicle market, more and more customers are starting to buy domestically made cars instead of Teslas. Musk’s company is also under pressure in Europe.
In the US, he can pin his hopes on politics: both Democrats and Republicans want to send a tough signal to China and exclude its electric vehicles from the domestic market with extremely high import tariffs. Tesla would benefit from this. But even without BYD, there are enough competitors to challenge Tesla’s market share. Tesla is facing the reality that its best-selling models, Model 3 and Y, are aging. New and, most importantly, cheap models are needed to keep up.
Robot taxis have been around for a long time
Elon Musk realized a while ago that Tesla couldn’t maintain its unique position in the U.S. electric car market forever. So he wanted to fundamentally turn the company around. He built Tesla’s future on artificial intelligence, humanoid robots, and especially robot taxis.
These are self-driving vehicles that belong to Tesla customers, but are not usually driven by them, but are used as taxis. These cars will drive independently in cities and carry passengers from point A to point B, generating revenue for the owners and Tesla.
Investors are excited about Musk’s vision. Shares have risen by more than a third since June, when the company’s boss described in more detail how the robotaxi business should work. Tesla has since delayed the planned unveiling of its robotaxi; the car will now be unveiled in the autumn, rather than early August. The reason is said to be a change in the front design.
In a call with investors on Tuesday, Musk said Tesla’s value is based primarily on its self-driving car business. But those cars aren’t here yet, and Tesla needs profits from its traditional electric car business to fund the development of robotaxis.
Gasoline engines remain popular
Tesla’s malaise becomes apparent when you compare it to its competitors that reported quarterly numbers on Tuesday: General Motors, the legacy company from Detroit, is currently benefiting from the fact that U.S. car buyers are not turning to electric vehicles as quickly as they once thought a year ago.
GM’s largest gas-guzzling vehicles in particular are selling very well and bringing the company profits, something that people wouldn’t necessarily have predicted two or three years ago when the green wave was at its peak. As a result, GM has further delayed the start of production at a new plant for electric trucks in its hometown of Michigan. Rival Ford has taken a similarly hesitant approach.
Unlike Tesla, Americans’ slow shift from gas cars to electric cars has been convenient for GM, which makes a ton of money on every conventional SUV it currently sells in the U.S.
Meanwhile, Tesla’s stock price remains very high, with a price-to-earnings ratio of over 60. Investors will need a lot of patience and have to believe that Elon Musk will once again put out fires for them with his genius and his robotaxis.
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