New setback for Tesla. With a profit of 1.48 billion dollars recorded between April and June 2024, the American car manufacturer is experiencing a 45% drop in its net profit.
In April, the electric car giant had already had to cut some 14,000 jobs, or 10% of its workforce. This was even though its boss, Elon Musk, “hates nothing more than laying off people,” according to his own words. “But,” he continued, “it has to be done.” And for good reason, all the indicators are in the red. In the first quarter of 2024, Tesla was weighed down by an 8.5% drop in production, coupled with an 8.5% drop in sales. A first in four years. In short, a serious loss of momentum that could be due to the evolution of several parameters.
A decline in demand coupled with prices that are too high
First and foremost is a decline in demand for electric cars. A point identified by the Bank of America, which noted in a note – consulted by the specialist site Markets Insider – that Tesla had produced 46,561 more vehicles than it had sold in the first quarter. This is one of the reasons why the number two in the American banking sector had revised downwards its price target for Tesla shares from 280 to 220 dollars, a drop of more than 20%.
“With inventories having accumulated in the first quarter, it would appear that the main reason for the weak delivery figures is the decline in demand for electric vehicles in all geographies, particularly in North America, where electric car sales volumes have largely stagnated since the summer of 2023,” explains the bank, which had thus provided advice to the company led by Elon Musk in 2008.
In addition, Bank of America notes two points: selling prices that are certainly too high, and an offer that is not sufficiently “refreshed”. Thus, “unless Tesla exploits new geographic markets, we believe that it is difficult for the company to generate additional sales with its current product portfolio or without further reducing its prices”, deciphers the bank. Especially since according to a study by the German organization TÜV-SÜD By the end of 2023, the Tesla 3 would be the least reliable electric vehicle model in the German vehicle fleet, due to failures in braking, lighting, and axles.
Decline in the Chinese market
Another possible explanation: a drop in attractiveness on the Chinese market. The American electric giant no longer has the same popularity it once had with customers in the world’s second largest economy. According to information from Agence Option Finance, the China Passenger Car Association estimates that Tesla sales in China fell by 24.2% in June over the year. A first in four years, which demonstrates “Tesla’s loss of ground in China”, concluded the Chinese newspaper. Jiemian end of April.
It must be said that on the ground, the competition is tough. To gain market share, Elon Musk’s company had been forced to slash its prices, forcing its Chinese competitors to fall in line. Problem: “Chinese car manufacturers are no longer following price cuts,” observes Jiemian. And they are banking on a faster renewal of their ranges of electric vehicles, where Tesla is struggling.
Schedule delays
The release of robot taxis promised for August 8, for example, was postponed to October 10 due to “a major design change at the front,” explained Elon Musk in July, who admitted to sometimes being “exaggeratedly optimistic.” The billionaire also argued that an additional delay would allow Tesla to “add a few other elements.”
As for the “roadster” car model that Elon Musk announced in February for a launch in late 2024, production should ultimately begin “next year,” he told analysts. His giant factory near Berlin began production of right-hand drive vehicles in the second quarter, with first deliveries already taking place in the United Kingdom.
Tesla, optimism as a driving force
Despite its struggles, the company still managed to grow its revenue by 2% between April and June to $25.5 billion. That’s a slight improvement over the $24.34 billion it had expected. Earlier this week, Tesla said it was prioritizing cost cutting, growing traditional businesses, and accelerating the development of AI-infused products and services.
Furthermore, without risking giving figures, the American giant stated on Tuesday that its futuristic Cybertruck pickup, which should be profitable by the end of the year, had “become the best-selling electric pickup in the United States in the second quarter”. Because if the current production capacity is less than 125,000 Cybertrucks per year in the Texas (south) factory, it has nevertheless tripled from one quarter to the next. Tesla, or optimism.