Tesla is committing itself to accelerate the release of its “economically accessible” electric car models, a move that has boosted its share value despite the company recording a 9% drop in revenue for the first quarter due to weak sales. The electric car manufacturer revealed in a Tuesday statement that it has revised its upcoming vehicle roster to expedite the debut of new models, departing from its previous schedule which projected production to commence in the latter half of 2025.
These new models will feature “economically accessible” cars that can be assembled using the company’s existing manufacturing facilities. Tesla’s after-trading shares experienced a surge, increasing over 12%, after this announcement.
Earlier in January, Elon Musk, Tesla CEO, shared plans for the creation of a new, more affordable car scheduled to start production in the coming year, known as the Model 2 and retailing at $25,000 (€23,400). However, a Reuters report alleging the scrapping of the project caused turmoil, forcing Musk to deny claims.
During an earnings call, Musk declined to disclose specific details regarding an “economically accessible” next-generation vehicle. Furthermore, Musk did not clarify how such vehicles would be produced using Tesla’s existing infrastructure, despite previously claiming that the Model 2 would necessitate a radically new system at its facilities in Austin, Texas, and Mexico.
Subsequently, Musk detailed that more information would be revealed in conjunction with an August announcement regarding “robotaxis”. He went on to envision Tesla as an AI and robotics firm, building its foundation on its independent driving system and humanoid robots.
During turbulent times for Musk and the electric vehicle industry, before the surge in share prices after Tuesday, Tesla’s stock had plummeted over 40% since the year’s launch, following warning lights of stalling vehicle deliveries, decreasing profit margins, a potential relocation from Delaware to Texas, and plans to cut at least 14,000 jobs, a 10% workforce reduction.
Major American automobile manufacturers have noted a downfall in the sales of electric cars, attributable to lessening consumer interest, increasing inclination towards hybrid models and stiff competition from affordable Chinese brands. As per Christopher Tsai from Tsai Capital, a holder of Tesla shares, despite the existing issues that Tesla has to battle with, the company’s long-term growth trajectory continues to remain positive. He stressed on the potential for high-margin revenue from autonomous vehicles, a potential that should not be overlooked.
However, without the excitement of a novel vehicle lineup, the underlying financial performance remains far from satisfactory. The revenue for the first quarter has slumped to $21.3 billion (€19.9 billion), down from $23.3 billion during the same duration the previous year, failing to meet the predicted $22.3 billion. This marks the first quarterly year-on-year drop for Tesla since the beginning of 2020.
In addition, the adjusted earnings per share also dipped almost 50% from the previous year to 45 cents as opposed to projected estimates of 52 cents. Furthermore, Tesla announced its sixth successive quarter of declining gross margins. This crucial fiscal parameter plummeted to 17.4 per cent, a substantial fall from a high of 29.1 per cent in the first quarter of 2022. The information was provided by The Financial Times.