Tesla announces Q1 earnings decline due to production challenges and market pressures

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24th April 2024 – (Hong Kong) Tesla Inc., the leading American electric vehicle manufacturer, disclosed a noticeable decline in its financial performance for the first quarter of 2024, with revenues and profits both taking a hit as the company navigates through an array of operational and market challenges.

The automaker’s total revenue for the period fell by 9% to $21.3 billion compared to the same quarter last year. This downturn was accompanied by a significant reduction in profitability, with gross profits sliding to $3.70 billion, marking an 18% year-over-year decrease. Earnings per share also suffered, plummeting from 85 cents a year ago to 45 cents.

Net income attributable to common shareholders reflected a stark decline, falling 55% year over year to $1.13 billion. The company’s production and delivery figures also fell short of expectations, with total deliveries for the quarter standing at 386,810 vehicles, below analysts’ forecasts. Production was reported at 433,371 vehicles, a decrease from previous figures.

The financial statement revealed a severe drop in free cash flow, which stood at negative $2.53 billion, down dramatically by 674% from the previous year. This decline was influenced by decreased production at Tesla’s Gigafactory Shanghai, attributed to seasonal impacts and planned halts around the Chinese New Year.

Tesla’s operational narrative for the quarter was laden with challenges including geopolitical tensions such as the Red Sea conflict and a severe arson attack at its Gigafactory Berlin. Moreover, the company faced hurdles in ramping up production of the updated Model 3 at its Fremont facility.

Despite these difficulties, Tesla noted some positive movements in cost management, particularly in terms of reductions in the cost of goods sold (COGS) per unit, which were primarily driven by lower raw material costs. This was partly offset by the disruptions mentioned, excluding those related to the Cybertruck and unscheduled factory downtimes.

On the strategic front, Tesla continues to push for broader electric vehicle adoption, expressing concern over the industry’s tilt towards hybrid models which, while beneficial to Tesla’s regulatory credits business, diverge from its mission to promote EVs. The company highlighted its ongoing efforts to penetrate new markets, including Chile, which will be served by the Gigafactory Shanghai.

In response to the economic backdrop, Tesla has implemented a cost-cutting program aimed at enhancing operational efficiency across the board. The company remains committed to reducing COGS per vehicle as part of its broader strategy to maintain financial health and support future growth.

Investments have not waned despite the financial downturn; Tesla reported capital expenditures amounting to $2.8 billion during the quarter. These investments are directed towards expanding AI infrastructure, production capacities, and its Supercharger and service networks, alongside developing new product infrastructures.