Tesla, profits at their lowest since 2021, but the announcement of new models rattles the stock

Tesla suffered a bad quarter: the American hi-tech and electric car leader's revenues declined for the first time since 2020 and even more than in the months marked by the pandemic paralysis, in fact, they set a negative record since 2012. Profits, for their part, fell to their lowest levels since 2021. The declines were 9% in sales and 55% in profits, respectively, disappointing analysts' expectations and keeping questions about the group's strategy open.

Chief executive Elon Musk, in his conference with analysts on the results, responded to the challenge with a surprise. He promised news coming earlier than previously expected: he said that production of new models would start 'in early 2025 if not by the end of this year'. The promise corrected earlier indications that saw such developments coming no earlier than the second half of next year. Musk then boasted of the investments in artificial intelligence that the company is now pursuing after delays. And, among the new developments, he indicated that he has also begun negotiations with 'a major car manufacturer' to license its advanced but controversial assisted driving system, dubbed Full Self-Driving or Fsd.

The stock in the after-market gained 11%, perhaps buoyed by these commitments to a new generation of vehicles, which should include everything from a robotaxi to, most importantly, a new low-cost car that has so far seemed postponed - the Model 2. However, it remains down about 40 per cent since the start of the year, at the tail end of the so-called Magnificent Seven US high-tech companies and under pressure from a combination of slowdowns in the global electric vehicle market, price wars among an if growing intensity and an ageing product line. Several analysts have recently downgraded the stock market target for the group..

Tesla responded to the winds of crisis by also recently initiating a drastic reorganisation that mandated a 10% cut in the global workforce and saw the departure of two top executives. However, open challenges were still evident in the accounts for the January-March period. More specifically, Tesla posted profits of 1.13 billion, or 45 cents per share net of extraordinary items versus at least 51 cents expected, and a turnover of 21.3 billion, compared to the 22.15 billion assumed. Revenue from core automotive activities slipped even more, by 13% to 17.38 billion. The operating margin decreased to 5.5% from 11.4% last year. Automotive gross profit margins, net of emission credit collections that have traditionally inflated them, slipped to 16.4% from 19%. Per vehicle, operating profits were halved to $3,000.

In its budget statement the company pointed out that 'global EV (electric vehicle) sales continue to be under pressure, with many manufacturers prioritising hybrids over electrics'. It asserted, however, that it wanted to distinguish itself: 'While many are decreasing investment, we are investing in future growth'. Echoing Musk, and to rebut the seemingly growing scepticism of analysts and investors, he added that 'we have updated our future vehicle line-up to accelerate the launch of new models earlier than previously communicated, the second half of 2025'. Refere addressing what is coming at a now tighter timeframe spoke of "new vehicles, including more affordable models". In the past, its executives had defined the group's current position as being in the middle of two growth phases, one now archived (hinging on the Model Y crossover and the Model 3) and one to come on which it is now unbalanced. A gamble that also entails risks: operators and analysts will be waiting in the wings for evidence of new successes..