In the second quarter, Tesla missed Wall Street earnings estimates and recorded its lowest profit margin in over five years. The electric car manufacturer boosted its investment on artificial intelligence (AI) initiatives while lowering prices to boost demand.

The business stated that it is on schedule to begin producing new cars in the first half of 2025, including more reasonably priced variants, even if the models won’t save as much money as anticipated. In trading after hours, shares dropped 8%.

“Tesla’s investors need results, and they need them fast—both for the humanoid robot and for the Robotaxi,” stated Thomas Monteiro, senior analyst at Investing.com. “Perhaps more than ever in the company’s recent history.”

During the turbulent second quarter, Elon Musk, the CEO, decided not to pursue the construction of a completely new, less expensive automobile in favour of less ambitious models. Instead, he focused on developing self-driving taxis, which helped to increase share prices.

In an effort to save costs, the business also let go of more than 10% of its workforce. According to Tesla, restructuring charges and a rise in operational costs mostly attributable to AI initiatives also hurt profit.

Visible Alpha surveyed 20 analysts, and they found that Tesla’s automotive gross margin, excluding regulatory credits, was 14.6% in the second quarter as opposed to forecasts of 16.29%.

According to AJ Bell financial expert Dan Coatsworth, Tesla has now failed profit expectations for four consecutive quarters. “Humanoid robots, autonomous driving, and robotaxis are hot topics right now. While this makes for an interesting story for investors, it doesn’t change the fact that these are the potential riches of the future, not the present.”

During a conference call with investors, Musk stated that new rivals “have discounted their EVs very substantially, which has made it a bit more difficult for Tesla.”

Deliveries of the company’s electric vehicles have decreased over the past two quarters as the carmaker struggles with growing competition and sluggish demand brought on by a dearth of reasonably priced new models.

Compared to a year ago, Tesla’s sales of electric vehicles (EVs) manufactured in China—which are also exported to Europe and other countries—dropped in the second quarter. In contrast, BYD Co. and other Chinese automakers reported robust sales increases.

On Tuesday, Tesla announced that it anticipated a quarterly rise in production for the third quarter.

LSEG data shows that the company’s quarter-end sales of $25.50 billion was marginally higher than both analyst and year-ago projections.

Compared to a year ago, Tesla’s sales of regulatory credits nearly quadrupled to a record $890 million in the second quarter. To satisfy regulatory objectives for the manufacture of clean vehicles, conventional automakers purchase credits from Tesla.

In the second quarter, net income was $1.48 billion, down from $2.70 billion a year earlier. According to LSEG, adjusted profits per share were 52 cents, which was less than the Wall Street expectation of 62 cents.

Since shareholders voted to ratify Musk’s $56 billion compensation plan, which was declared unlawful by a Delaware court in January, on June 13, Tesla’s shares had increased by more than 30%. Expectations for robotaxis also helped to boost its stock.

Over the years, Musk has positioned Tesla as a technological firm, highlighting the importance of self-driving technology most recently. He said on Tuesday that he would be stunned if self-driving software were not ready to operate Tesla vehicles without human supervision in 2019. Predictions of the technology improving have been missing for years.

The “timing of Robotaxi deployment depends on technological advancement and regulatory approval,” according to a statement made by Tesla on Tuesday. On the conference call, however, Musk stated, “I don’t think regulatory approval will be a limiting factor.”

Additionally, he predicted that before the end of this year, China and Europe will likely approve Tesla’s “supervised” Full Self-Driving software, which necessitates driver attention.

According to Musk, Tesla decided to make some significant improvements to the Robotaxi, which is why the product’s launch was postponed from August 8 to October 10.

He had revealed the August 8 debut date in response to Reuters’ story that Tesla had abandoned plans to produce a long-promised all-new, less expensive vehicle that would likely retail for about $25,000 in favour of self-driving taxis.

“Elon is very good at showing investors what he has, but new ideas are usually long on vision and short on execution,” stated David Wagner, head of equities and portfolio manager at Aptus Capital Advisors, a Tesla investor.

By 2024, Musk had stated in 2022, Tesla planned to mass-produce a robotaxi devoid of a pedal or steering wheel.

General Motors said on Tuesday that it will be delaying its Origin car, which was supposed to have no steering wheel, indefinitely and instead concentrating its development resources on a new generation of Chevrolet Bolt.

Production of Cybertrucks, according to Tesla, “remains on track to achieve profitability by end of year.”

With its innovative dry coating battery manufacturing method, Tesla has begun testing its first Cybertruck prototypes. The company claims that as production ramps up, this will be “a major cost reduction milestone.” Production is expected to begin in the fourth quarter.

(Adapted from MoneyControl.com)