Musk’s Politics Cast Shadow Over Tesla’s Earnings Drop
The fallout from Elon Musk’s plunge into politics a year ago is still hammering his Tesla business as both sales and profits dropped sharply again in the latest quarter.
The car company that has faced boycotts for months said Wednesday that revenue dropped 12% and profits slumped 16% in the three months through June as buyers continued to stay away.
“The perception of Elon Musk, its chief executive, has rubbed the sheen right out of what once was a darling and soaring automotive brand,” wrote Forrester analyst Dipanjan Chatterjee in an email. Tesla is “a toxic brand that is inseparable from its leader.”
Quarterly profits at the electric vehicle, battery and robotics company fell to $1.17 billion, or 33 cents a share, from $1.4 billion, or 40 cents a share. That was the third quarter in a row that profit dropped. On an adjusted basis, the company said it earned 40 cents a share, matching Wall Street estimates.
Revenue fell from $25.5 billion to $22.5 billion in the April through June period, slightly above Wall Street’s forecast.
Tesla shares fell 3% in after-hours trading.
Musk spent the company’s earnings conference call talking less about car sales and more about robotaxis, automated driving software and robotics, which he says is the future of the company. But those businesses have yet to take off, and the gap between promise and profit was apparent in the second quarter.
“It appears management’s focus will now shift to robotaxis and away from deliveries growth,” said Morningstar analyst Seth Goldstein, referring to car sales.
A big challenge is that potential buyers not just in the U.S. but Europe are still balking at buying Teslas. Musk alienated many in the market for cars in Great Britain, France, Germany and elsewhere by embracing far-right politicians there. And rival electric vehicle makers such as China’s BYD and German’s Volkswagen have pounced on the weakness, stealing market share.
Musk spent the company’s earnings conference call talking less about car sales and more about robotaxis, automated driving software and robotics, which he says is the future of the company. But those businesses have yet to take off, and the gap between promise and profit was apparent in the second quarter.
“It appears management’s focus will now shift to robotaxis and away from deliveries growth,” said Morningstar analyst Seth Goldstein, referring to car sales.
A big challenge is that potential buyers not just in the U.S. but Europe are still balking at buying Teslas. Musk alienated many in the market for cars in Great Britain, France, Germany and elsewhere by embracing far-right politicians there. And rival electric vehicle makers such as China’s BYD and German’s Volkswagen have pounced on the weakness, stealing market share.
Tesla generated $439 million from credit sales, down sharply from $890 million a year ago.
“We’re in this weird transition period where we’ll lose a lot of incentives in the U.S.,” Musk said, predicting several rough quarters ahead. He added, though, “Once you get to autonomy at scale in the second half of next year, certainly by the end of next year, I would be surprised if Tesla’s economics are not very compelling.”
One way for Tesla to boost sales while waiting for that future: A cheaper model. The company now is planning to introduce that to the market in the last three months of the year. Tesla had previously said that was going to happen by June this year.
Musk also said he expected regulatory approval to introduce its so-called Full Self-Driving software in some parts of Europe by the end of the year. Musk had previously expected that to happen by March of this year. The feature, which is available in the U.S., is a misnomer because it is only a driver-assistance feature.
In the robot business, Musk said he expects explosive growth as Tesla ramps up production of its humanoid Optimus helpers to 100,000 a month in five years.
“We’ll go from a world where robots are rare to where they’re so common that you don’t even look up,” he said.
Asked about whether he would want more than his current 13% stake in Tesla to keep control, Musk said he did want more but not too much.
“I think my control over Tesla should be enough to ensure that it goes in a good direction,” he said, “but not so much control that I can’t be thrown out if I go crazy.”
Gross margins for the quarter, a measure of earnings for each dollar of revenue, fell to 17.2% from 18% a year earlier.
A highlight from the quarter was from something far removed from cars and robots: the company’s investment in bitcoin. That bet generated a $284 million paper gain, compared with a loss the previous quarter.
This article was first reported by Associated Press
