In a dynamic first quarter, Elon Musk's Tesla contended with a terrorist organization, survived an arson attempt, and fiercely competed with hybrid car makers, all against a backdrop of falling prices as competition for electric vehicle customers intensified.
As expected, it wasn't a good three months for Tesla. Sales fell 9 percent year-on-year to $21.3 billion and net profit plunged 55 percent to $1.1 billion as the sector feels the squeeze from China-based manufacturers and an uncertain economy.
Production numbers dropped to 433,371 units versus 440,808 a year earlier, and 494,989 in the prior quarter. Deliveries for the first three months of 2024 were 386,810 compared to 422,875 12 months ago and 484,507 in Q4 2023.
"Decline in volumes was partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin," said Tesla.
To counter the slowdown in sales and reduced profits, Tesla last week confirmed it was cutting 10 percent of the workforce, including expunging 2,700 roles in Austin, Texas, and upwards of 3,300 positions in Fremont, California. The cost of producing vehicles in Austin, Berlin, and Fremont are "very close," the company said. These are things Tesla can control.
On an earnings call with financial analysts, Musk said the "EV adoption rate globally is under pressure and a lot of other order manufacturers are pulling back on EVs and pursuing plug-in hybrids instead. We believe this is not the right strategy and electric vehicles will ultimately dominate the market."
Tesla began cutting prices to compete in 2022 and has continued this strategy ever since, most recently lopping a third off the upfront cost of Full Self-Driving software and reducing the price of some cars. It is locked in a race with Chinese manufacturer BYD.
As revealed earlier today, the International Energy Association said adoption of EVs in China is higher than in the West due to local prices being lower than traditional combustion engine cars. With this in mind, perhaps, Musk talked of rolling out "more affordable models" from existing production lines, most likely in early 2025.
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Musk again talked up Full Self-Driving, now on version 12, telling analysts that if they still haven't tried one, they must. "It's profound and the rate of improvement is rapid."
"We've now turned that on for all cars with the cameras and inference computer, everything from Hardware 3 on in North America. So, it's been pushed out to, I think, around 1.8 million vehicles, and we're seeing about half of people use it so far and that percentage is increasing with each passing week.
"Gasoline cars that are not autonomous will be like riding a horse and using a flip phone. And that will become very obvious in hindsight."
In another forward-looking moment – who wants to discuss a crappy Q1? – the billionaire steered his audience to Tesla's "purpose-built robotaxi or cybercab" which will be "showcased in August."
One more thing that handily grabbed analyst attention during the call was the status of Tesla's humanoid robot Optimus.
"We are able to do simple factory tasks or at least, I should say, factory tasks in the lab. We do think we will have Optimus in limited production in the natural factory itself, doing useful tasks before the end of this year. And then I think we may be able to sell it externally by the end of next year. These are just guesses.
"As I've said before, I think Optimus will be more valuable than everything else combined. Because if you've got a sentient humanoid robot that is able to navigate reality and do tasks at request, there is no meaningful limit to the size of the economy. So, that's what's going to happen. And I think Tesla is best positioned of any humanoid robot maker to be able to reach volume production with efficient inference on the robot itself.
"I mean, this, perhaps, is a point that is worth emphasizing. Tesla's AI inference efficiency is vastly better than any other company. There's no company even close to the inference efficiency of Tesla. We've had to do that because we were constrained by the inference hardware in the car. We didn't have a choice."
Wall Street seemed to forget about the Q1 results and was more interested in the forward-looking stuff Musk says Tesla is working on. As such, the company share price went up 12 percent after the numbers were filed. ®
