Tesla Accelerates Rollout of More-Affordable EVs as Profit Drops Sharply

Tesla Chief Executive Elon Musk sought to assuage Wall Street’s concerns about the company’s strategic direction by underscoring the automaker’s commitment to making less-expensive electric cars.

On the company’s Tuesday earnings call, Musk said Tesla was accelerating the launch of new models, including vehicles that would sell at more-affordable prices.

His comments cap a dismal start to the year for the world’s most-valuable automaker, which saw its first-quarter profit plunge to its lowest level since 2021. Tesla’s operating margin narrowed significantly, dropping to 5.5% in the first three months, from 11.4% a year earlier.

Musk also emphasized the importance of Tesla’s achieving its longstanding—and thus far elusive—goal of developing an autonomous car.

He shared new details about the company’s plans for a dedicated robotaxi model and ride-hailing network, saying Tesla would operate its own fleet and allow customers to deploy their vehicles for the service, which he compared to Airbnb. Musk also floated a possible name for the robotaxi, which is set to be unveiled in August. In an offhand remark, he referred to the model as the Cybercab.

“If somebody doesn’t believe Tesla is going to solve autonomy, I think they should not be an investor in the company,” Musk said.

The Texas-based carmaker reported net income of $1.1 billion for the January-to-March period, down 55% from the year prior. Revenue fell 9% year over year to $21.3 billion, reflecting a decline in both vehicle prices and deliveries.

The stock was up more than 10% in after-hours trading Tuesday, following the release of the earnings report. Tesla shares closed Tuesday at $144.68, down 42% in 2024.

Tesla is in a more precarious place than it has been in years, with its vehicle sales falling, demand cooling for electric vehicles industrywide and Musk’s placing greater emphasis on developing a fully autonomous car, a project many investors view as risky.

The company’s earnings call was Musk’s first formal audience with investors since initiating a restructuring that is expected to reduce the company’s global workforce by more than 10%.

There have been other changes, too. Two top executives said earlier this month they were leaving the company, and employees have been told to focus on a so-called robotaxi, a reshuffling of priorities that has taken the market by surprise.

Martin Viecha, Tesla’s longtime head of investor relations, ended Tuesday’s earnings call by saying he, too, would be leaving his role.

Many investors had been expecting Tesla to release a more-affordable electric car next year that could extend the company’s reach into the mass market. Tesla sells five passenger models—fewer than many other automakers—and earlier this month reported an 8.5% decline in first-quarter deliveries.

Musk declined to share details about the new models Tesla has in the works, which he said are likely to launch sooner than late 2025, when he previously said a low-cost car would enter production.

When asked if Tesla planned to make “tweaks” to existing offerings or release entirely new models, the CEO demurred. “I think we’ve said all we will on that front,” Musk said.

Tesla attributed some of its performance in the first quarter to the “gradual” production ramp of its updated Model 3 car in California.

On Wall Street, analysts have been coming to terms with the idea that Tesla—long valued for its growth potential—might not increase deliveries at all this year.

Tesla reiterated Tuesday that growth in 2024 might be “notably lower” than it was the previous year. Executives have described Tesla as being between two growth waves: the first driven by its popular Model Y crossover and Model 3 car, and the next to come with the launch of a new generation of vehicles.

The company’s newest model, the difficult-to-make Cybertruck pickup, has gotten off to a slow start since hitting the market late last year.

The company cut prices again in recent days, knocking $2,000 off several models in the U.S., as it confronts stiffening competition in the EV market.

“Tesla’s aging vehicle lineup is already facing considerable demand weakness and price pressure so far, and our sense is that Tesla has now moved into cash preservation mode,” Deutsche Bank analyst Emmanuel Rosner wrote in a note ahead of the earnings report. The bank downgraded Tesla’s stock and reduced its price target to $123 per share, from $189.

Tesla’s free cash flow turned negative in the first quarter, with the company bleeding about $2.5 billion as it invested in artificial-intelligence infrastructure, and unsold-vehicle inventory climbed to 28 days of supply, from 15 days the year prior.

Meanwhile, Tesla’s board of directors is asking shareholders to reapprove Musk’s 2018 pay package after a Delaware judge struck it down in January, finding the approval process to have been “deeply flawed.”

The pay plan, valued at a maximum of $55.8 billion, is the largest ever granted to the chief executive of a U.S. public company. Musk, who runs several companies, said Tuesday the carmaker takes up “the majority of my work time.”

Tesla is also asking shareholders to approve a plan to move the company’s incorporation to Texas, from Delaware. Other Musk companies have reincorporated outside of Delaware after the court’s decision on his pay.

The CEO in recent months has pushed to increase adoption of driver-assistance technology that the company calls “Full Self-Driving Capability,” which requires driver supervision.

Tesla recently slashed prices for this software, which now costs $8,000 upfront or $99 a month—down from $12,000 or $199 monthly—and allows the car to assume a range of driving tasks. The company also has begun offering U.S. drivers with FSD-capable vehicles a one-month free trial of the technology.

“We’re putting the actual ‘auto’ in automobile,” Musk said Tuesday.

Write to Rebecca Elliott at [email protected]