Tesla‘s profits dropped 45 percent in the second quarter of the year as Americans’ demand for electric vehicles slows.
In the face of falling interest in EVs, Elon Musk’s company had been forced to offer discounts and cut prices to lure in buyers – piling pressure on profit margins.
It comes after the electric car manufacturer had a significant number of unsold vehicles on its books at the end of the first quarter of the year.
The company’s global deliveries fell 6.5 percent in the first half of the year as American’s demand for EVs has continued to soften.
However, Tesla said it was on track to roll out a cheaper EV, said to cost around $25,000, by early 2025 – which analysts say will boost sales.
Tesla ‘s profits dropped 45 percent in the three months to June 30
The smaller Tesla is set to be called the Model 2. After rumors earlier this year it had been cancelled, Musk is now vowing to have it ready within a year.
That marks an acceleration from its previous target of the second quarter of next year.
‘Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025,’ Tesla said in its Q2 earnings report.
The Texas-based company reported profits of $1.48 billion in the three months to June 30. That is almost half the level from the same time a year ago.
Tesla’s stock was down around 3 percent in after-hours trading on Tuesday following the earnings report.
Tesla’s CEO Elon Musk is focused on raising sales of EVs in the face of increased competition from other manufacturers while pushing forward a new robotaxi, self-driving cars and other AI investments.
Musk initially planned to unveil the robotaxi in early August but has since delayed the launch due to a last-minute design change.
Some investors, including Tasha Keeney from Ark Investments remain optimistic about the robotaxi investment for the company.
‘To ignore robotaxis today is a huge mistake with this stock, ultimately its an AI play’ Keeney told CNBC in the wake of the report.
‘Robotaxis will greatly expand the ride hail industry’ she explained.
‘We think robotaxis will make up 90 percent of the stock value’ in the future.’
The company’s current operating profit margin is sat at 6.3 percent, down from 9.6 percent in the same time last year.
Expensive bets on AI and driverless cars could take years to pay off.
The company is under pressure to raise sales in the face of increased competition
Musk is pushing forward a new robotaxi, self-driving cars and other AI investments
‘While we continue to execute innovations to reduce the cost of manufacturing and operations, over time, we expect our hardware-related profits to be accompanied by an acceleration of A.I., software and fleet-based profit,’ Tesla said in a statement.
The company is likely to come under increased pressure to prove it has way to continue to grow and boost profit following the report.
In an effort to cut costs Musk announced in April that the company would be laying off 10 percent of its global staff, around 14,000 people.
It has also slashed the price of its cars, reducing the profit margin it makes on each vehicle.