On Wednesday (July 23), Tesla CEO Elon Musk stated that the reduction in electric vehicle subsidies by the US government may lead the company to face a downturn in the coming quarters, but he anticipates substantial revenue growth from the autonomous driving business and related software by the end of next year.
Tesla experienced its most significant quarterly sales decline in over a decade in the second quarter of this year. Despite introducing the redesigned and popular SUV Model Y to boost market demand, revenue continued to decline consecutively, decreasing by 12% compared to the same period last year. While profits fell short of Wall Street expectations, the profit margin from manufacturing automobiles still exceeded external estimates.
Apart from insufficient car sales, revenue from “carbon credit sales” also plummeted by 51%, further impacting overall revenue and profits. The adjusted earnings per share (EPS) for the second quarter were $0.40.
However, Tesla’s automotive gross margin (excluding carbon credit revenue) stood at 14.96%, surpassing Wall Street predictions, partly due to reduced manufacturing costs.
During the earnings call, Musk addressed the issue of “carbon credit subsidies,” stating, “The next few quarters are going to be challenging for us. Not definitely, but possibly — the fourth quarter, the first quarter, maybe the second quarter. But once we get into heavy, full self-driving towards the end of next year, especially by the end of next year, if Tesla’s financials are not improving significantly, then I would be very surprised.”
Facing sluggish vehicle sales and the US government’s plan to reduce the tax credit of $7,500 per electric vehicle later this year, Musk is actively promoting autonomous driving technology and is set to begin production of the self-driving taxi (Cybercab) next year.
Musk emphasized in the call, “Autonomous driving is the key to the future.”
By the end of this year, Musk plans to make autonomous ride-hailing services available to approximately half of the US population. Tesla is seeking regulatory approvals for unmanned taxis in the San Francisco Bay Area, Nevada, Arizona, Florida, and other regions.
Musk indicated that the unmanned taxi business could significantly impact the financial situation by the end of next year.
Simultaneously, Tesla is developing a more affordable electric vehicle and aims to gradually increase production in the next quarter. As of the end of June, the company has started production of test vehicles. Due to economic uncertainty and the undetermined launch date, Tesla has not disclosed the annual sales target for this vehicle model.
eMarketer analyst Jacob Bourne stated that considering the recent challenges faced by Tesla, the financial results were not surprising. He noted that if Tesla successfully introduces a genuinely affordable electric vehicle without compromising the brand image of high-end models, it could be a key driver in boosting sales.
(Reference: Reports from Reuters)