4 key takeaways from Tesla's first quarter earnings

Wed 24 Apr 24, 11:11am (AEST)
Lithium 6 EV Tesla
Source: iStock photo

Key Points

  • Tesla reported a 9% drop in first quarter revenues, the steepest year-on-year decline since 2012
  • Despite missing analyst expectations, Tesla shares surged post-market on hopes of an accelerated roll out of cheaper EV models
  • Tesla says vehicle deliveries in 2024 will likely be "notably lower than 2023" and currently taking aggressive steps to lower costs

Tesla is often viewed as a bellwether for the lithium industry. But its staggering 42% year-to-date share price spiral serves as a reminder of the industry's profound challenges.

The electric vehicle company reported its earnings for the first three months of this year on Wednesday morning and pretty much everything missed analyst expectations.

  • Revenue down 8.7% year-on-year to US$21.3 billion

  • Production down 1.7% to 433,371 vehicles

  • Deliveries down 8.5% to 386,810 vehicles

  • Gross margin down 190 bps to 17.4%

  • Adjusted EPS down 47.1% to 45 US cents

  • Free cash flow down 673.9% to -US$2.5 billion

Revenue and EPS missed consensus by around 4.4% and 13.5% respectively, while analysts were looking for a positive cash flow figure of around US$654 million.

Despite the figures, Tesla shares are up 13.4% in post-market trade after Elon Musk pledged to accelerate the rollout of cheaper EV models. We'll highlight some of the key takeaways from the results below.

#1 Cheaper EVs are coming

Tesla's investor presentation revealed plans to begin producing new affordable EVs by early 2025. The key quotes include:

  • "We have updated our future vehicle line-up to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025."

  • "These new vehicles, including more affordable models, will utilise aspects of the next generation platform as well as aspects of our current platforms, and will be able to be produced on the same manufacturing lines as our current vehicle line-up."

  • "This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more CAPEX-efficient manner during uncertain times. This would help us fully utilise our current expected maximum capacity of close to three million vehicles, enabling more than 50% growth over 2023 production before investing in new manufacturing lines."

The plan to undercut competitors (by potentially a wide margin) leaves Tesla's valuation to the imagination as opposed to disappointing and measurable fundamentals. Tesla has delivered on several ambitious goals in the past – so what's in store for the next 6-12 months?

#2 EV sales are under pressure

Tesla has not seen revenue fall like this (in percentage terms) since 2012.

"Global EV sales continue to be under pressure as many carmakers prioritise hybrids over EVs," noted the investor presentation.

"While positive for our regulatory credits business, we prefer the industry to continue pushing EV adoption ... To support our growth, we have been increasing awareness and expanding vehicle financing programs, including attractive leasing terms for our customers."

Tesla expects vehicle volume growth in 2024 to be "notably lower than the growth rate achieved in 2023."

#3 Taking one out of Meta's playbook

Meta CEO Mark Zuckerberg dubbed 2023 as the "year of efficiency", which marked commitments to reduce headcount and cut underperforming projects.

Tesla is taking a similar approach to improve profitability and lower costs. "We recently undertook a cost-cutting exercise to increase operational efficiency. We also remain committed to company-wide cost reduction, including reducing COGS per vehicle," the company said.

Tesla is reportedly laying off more than 10% of its global workforce, according to Reuters. This has already impacted thousands of workers at its Texas and California-based factories.

#4 Watch out Uber

Tesla could become an app that sits next to Uber on your phone in the not-too-distant future.

"We have been investing in the hardware and software ecosystems necessary to achieve vehicle autonomy and a ride-hailing service."

"We are currently working on ride-hailing functionality that will be available in the future. We believe the Tesla software experience is best-in-class across all our products, and plan to seamlessly layer ride-hailing into the Tesla App."

Ride-hailing peers like Uber and Lyft fell a respective 1.1% and 1.9% in after hours.

Written By

Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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