Tesla misses targets as price cuts, incentives weigh
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The news: Tesla reported its lowest profit margin in more than five years and missed Wall Street earnings targets in the second quarter, as the electric vehicle maker cut prices to revive demand while it increased spending on AI projects.
The numbers: The company reported revenue of USD25.50 billion ($38.50 billion) for the three months ended June, a 2% increase from a year ago and ahead of analysts estimate of USD24.77 billion.
However, net income in the second quarter tumbled 45% from a year ago to USD1.48 billion. Adjusted earnings of 52 US cents per share missed the Wall Street consensus of 62 cents.
Tesla stock slid more than 4% in after hours trading in New York.
The context: The results were a reminder of headwinds facing the company in its main auto business, even as CEO Elon Musk reoriented the carmaker to self-driving technology, helping Tesla stock recoup most of its losses this year.
The company's electric vehicle deliveries have fallen for two consecutive quarters as the automaker battles rising competition and slow demand stemming from a lack of affordable new models. Tesla recorded automotive gross margin excluding regulatory credits of 14.65% in the second quarter, compared with estimates of 16.29%.
The second quarter marked a tumultuous period for the EV maker, with Musk shelving development of an all-new cheaper car in favor of working on creating self-driving taxis. The company also laid off more than 10% of its employees in the face of slowing sales and rising competition.
Tesla said profit was also weighed down by an "increase in operating expenses largely driven by AI projects" and "restructuring charges."
The sources: Tesla earnings release, Reuters
