Shares of Tesla fell 12% in early trading on Wednesday after an earnings release showed slumping profits in the face of strengthened competition and sluggish sales.
The earnings report fell short of Wall Street expectations for profit.
“There have been quite a few competing electric vehicles that have entered the market and mostly, they have not done well, but they have discounted their EVs quite substantially, which has made it more a bit difficult for Tesla,” Tesla CEO Elon Musk told analysts on Wednesday.
Tesla shares plummeted more than 25% at the outset of 2024 but the company had recovered all of those losses this month after it released a better-than-expected report on vehicle deliveries. The stock price decline on Wednesday puts shares at their lowest level in more than three weeks.
The earnings results released on Tuesday mark two consecutive quarters of declining profits. Revenue from government credits increased to $890 million in the most recent quarter, accounting for more than half of the company’s profits.
Gordon Johnson, CEO and founder of data firm GLJ Research, who is bearish on Tesla, said the boost in revenue from government credits afforded the company a financial lifeline even as it struggled in its main line of business: selling vehicles.
“What is the core business doing?” Johnson told ABC News, suggesting the decline in performance was even worse than the earnings indicate.
Critics say demand for the company’s vehicles has slowed as a result of its failure to release a new, affordable model, as well as a softening in the overall EV market. As competitors roll out alternatives, Tesla faces a difficult path to regain its previous breakneck growth, analysts previously told ABC News.
Proponents, however, point to the company’s record of industry-leading innovation, suggesting the breakthroughs that fueled its sprint ahead of the competition could reemerge as it readies for new EV models and perfects its autonomous driving software.
Dan Ives, a managing director of equity research at the investment firm Wedbush, who is bullish on Tesla, downplayed the weaker-than-expected earnings report and highlighted potential gains from the company’s development of autonomous vehicles.
“We were not looking for major fireworks this quarter from Tesla,” Ives said on Wednesday in a note to investors. “The next phase of the Tesla growth story is around autonomous, Robotaxis, and AI playing out for Musk & Co. in our view and that vision is on the doorstep.”
Speaking to analysts on Tuesday, Musk said the company had made “a lot of progress” on its full self-driving software over the most recent quarter.
“We think customers will experience a step-change improvement in how well supervised full self-driving works,” Musk added.
That product has faced challenges, however. In December, Tesla recalled about 2 million cars over a safety issue tied to its autopilot system. Two months later, the company recalled about 360,000 more cars over crash risks tied to its self-driving system. Musk said on Tuesday that the company is delaying the launch of its Robotaxi service until October.
Johnson, of GLJ Research, voiced skepticism about the Robotaxi initiative.
“Tesla doesn’t have one Robotaxi on the road,” Johnson said.
