Strictly speaking, Tesla summed up the preliminary results of the previous quarter at the beginning of the month, but they concerned mainly the volume of electric vehicle deliveries, which decreased by 13%. Now the company has a full financial report ready, which states that in the first quarter it reduced revenue from the sale of electric vehicles by 20%.
Image Source: Tesla
Thus, Tesla’s financial results for the quarter turned out to be worse than analysts expected: total revenue fell by 9% to $19.34 billion against the forecasted $21.11 billion. Direct sales of electric vehicles brought the company less than $14 billion last quarter, which is 20% less than last year’s result. Operating profit fell by 66%, and the operating profit margin fell to 2.1%, although Tesla has always been especially proud of its high business marginality compared to competitors. The company’s net profit fell by 71% to $409 million. The company partly explains the increase in operating expenses by 9% to $2.75 billion by the need to invest more in the development of artificial intelligence.
Tesla partly explains the reduction in the volume of electric vehicle deliveries by the need to launch the updated version of the Model Y at all four operating plants. The need to reduce prices amid intense competition also had a negative impact on revenue. It is noteworthy that if Tesla did not receive funds from the sale of so-called “regulatory credits” to other automakers that do not meet environmental quotas, its electric vehicle business would already be unprofitable. In the last quarter, core revenues increased from $432 million to $595 million.
The company produced 345,454 units of the most popular Model 3 and Model Y in the first quarter, which is 16% less than the results of the same quarter last year. Other models, which include Model S, Model X and Cybertruck, fell in production by 18% to 17,161 units. In total, Tesla reduced the production volume of electric vehicles by 16% to 362,615 units by the end of the quarter.
The dynamics of changes in deliveries were not so uniform. While the mass-produced Model 3 and Model Y fell by 12% to 323,800 units, all other models reduced their deliveries by 24% to 12,881 units. Most likely, the latter element of the statistics was affected by the low popularity of the Cybertruck. Deliveries of Tesla electric vehicles as a whole for the quarter decreased by 13% to 336,681 units. It turns out that the company reduced production more than sales. The company’s management refrained from updating the forecast for the dynamics of deliveries for the entire current year and said that it would decide on this based on the results of the second quarter.
Tesla shares have already fallen 41% since the start of the year, and showed their worst seasonal performance since 2022 in the first quarter. The announcement of the quarterly financial results did not initially have much of an impact on their performance, and the shares even rose in price by almost 5% after Donald Trump admitted that he had no intention of firing US Federal Reserve Chairman Jerome Powell.
Image Source: Tesla
The company’s CEO Elon Musk made a number of statements that could contribute to investor confidence in the stability of Tesla’s business. First, he admitted that starting next month he would devote less attention to his activities as the head of the government department DOGE – no more than one or two days a week, which is also important if it is requested by the US President. Second, he confirmed that testing of the company’s unmanned taxis in Texas will begin in June of this year. Third, he promised to begin assembling humanoid Optimus robots on a pilot production line in California this year. Until now, it was believed that mass production of robots would be launched at the company’s head office in Texas, where they would also be used to assemble electric vehicles and traction batteries.
Tesla’s energy business, characteristically, demonstrated revenue growth of 67% to $2.73 billion, largely due to the company’s participation in projects to provide large data centers with backup power systems. On the other hand, this area of activity remains vulnerable to the possible impact of customs tariffs, since Tesla relies heavily on foreign suppliers in the production of energy storage systems. But in the field of electric vehicle production, the company, according to Elon Musk, will suffer the least from the growth of import duties in the United States compared to competitors. All this does not prevent Musk from declaring sympathy for the ideas of low customs rates and free trade.
The head of Tesla did not hide the fact that the company is considering the possibility of entering the Indian market, which is heavily protected by high import tariffs. In India, Tesla is attracted by the “large middle class” as potential buyers of its electric cars. Electric cars imported to India double in price due to taxes and duties, so Tesla will be thinking through its strategy for entering the local market especially carefully.
One way or another, the increase in tariffs will force Tesla to increase localization of production in the countries where it operates. At least in the US, the company intends to obtain equipment needed to produce the most affordable LFP traction batteries from local suppliers. At the same time, Musk admits that local suppliers will be able to cover only a small part of the company’s needs for such equipment. Supplies of materials and components from outside China will also expand, but this will take a long time. Musk called Tesla “the most vertically integrated company in the world,” but admitted that it cannot produce everything on its own. “We don’t grow rubber trees or mine iron ore,” the head of the company admitted. He also added that Chinese restrictions on the export of rare earth metals, which are used to create magnets, affected Tesla’s ability to produce humanoid Optimus robots. Tesla’s management is currently trying to obtain an appropriate export license in China, convincing officials that its robots cannot be weapons.