The firm led by Elon Musk has presented the results corresponding to the first quarter of 2024. The American car company has earned $21.3 billion in revenue, a figure lower than the $22.3 billion expected by the market. Additionally, the North American company has recorded $1.129 billion in profits, a year-on-year drop of 55%, its biggest drop since 2012. This equates to 34 cents per share, a figure lower than the 36 cents predicted by experts. However, the promise of new models in 2025 has satisfied investors, and the firm has even risen by 7% in the after-hours trading.
Simultaneously, the American company has registered a negative cash flow of $2.5 billion, caused by a 90% decline in cash generated by its activities. Specifically, these cash inflows have decreased from $2.5 billion to $242 million. This is a hard blow, as these funds are used to pay dividends, debts, and invest in innovation. However, Tesla still has $27 billion in cash in its “bank account”. In this regard, the firm has announced its decision to dip into its savings to expedite the development of the next generation of electric vehicles.
In this sense, the company has announced an increase of $1 billion in investments in AI. Additionally, it has seen an increase in inventory amounting to $2.7 billion. This is due, among other reasons, to an increase in the stock of unsold electric vehicles, which has doubled since the previous quarter. This means that Elon Musk’s company has manufactured more cars than it has managed to sell.
According to Tesla, the goal of the company is to “update our model lineup to unveil them before starting to produce them in the second half of 2025.” The company also points out that these new vehicles will include cheaper models but will be produced in the same plants as the current, less affordable units. One of these new cars will likely be the Model 2. In this sense, this Tuesday, Tesla unveiled the new Model 3 Performance.
Tesla entered the earnings season in a very delicate position: so far this year, it is the worst company in the entire S&P 500, with a cumulative decline of 41.5%. The firm has gone from being one of the ‘Magnificent Seven’ to being embroiled in a battle for the ‘last place’ with Globe Life, an insurer caught in a battle against fraud accusations by a Gotham City-style short seller. The electric car manufacturer has already lost 65% from its November 2021 highs, and investors are increasingly doubtful about its immediate future.
The company’s unwritten goal was to dominate the electric vehicle market, a sector that practically did not exist before its arrival. The idea was that by the time the rest of the automakers wanted to jump on the bandwagon, Tesla would already have a decisive advantage and giants like Volkswagen, Stellantis, Ford, or Toyota would have to fight for scraps.
However, the emergence of Chinese firms and Tesla’s struggles to ramp up vehicle production are casting doubt on that rosy future. And Chinese state subsidies to the automotive industry threaten to unleash a wave of cheap electric vehicles in the West. In this context, the showdown between Build Your Dreams and Tesla unfolds: the Chinese company challenges the American giant for the title of top seller of electric cars globally. BYD held that coveted crown until this past April, after it announced a year-on-year sales decline in the first quarter of 2024.
As things stand, Tesla’s anticipated move, the announcement of an affordable “Model 2,” is up in the air, but Musk resists pointing in that direction. In this regard, a report from Tesla exclusively published by Reuters indicated that Elon Musk’s firm intended to start producing new, more affordable electric vehicles by mid-2025. This could mean that the new, cheaper Model 2 would arrive around that time, however, the American firm still has a long way to go.
Meanwhile, the American brand has decided to cut prices on its cars in almost all parts of the world, in a price war against its Asian rivals, but it risks being left in no-man’s land: price reductions will diminish its revenues, but they will not be deep enough for any of its models to make the desired leap to being considered ‘affordable’. The success of this policy is crucial, as China is the second country where Tesla sells the most electric vehicles, second only to the US.
However, Tesla’s market share in China has declined in recent years, dropping from 10.5% in the first quarter of 2023 to 6.7% in December of that year. In contrast, BYD controls 33% of the Chinese electric vehicle market, and recently deployed a strategy of price cuts aimed not only at surpassing its electric rivals but also at ousting combustion car manufacturers from the market.
Simultaneously, Tesla continues to grapple with a serious labor conflict on the Scandinavian peninsula. There, the firm’s mechanics in Sweden initiated a strike against the American firm’s refusal to sign a collective agreement with the IF Metall union. This ongoing protest initially garnered solidarity from the postal service PostNord, operating in Sweden, Denmark, and Norway, which refused to deliver license plates for Tesla vehicles. Additionally, 3F, the largest Danish union, announced the blockade of Tesla vehicles from reaching Sweden at the country’s ports.
