Tesla narrowly beat Wall Street expectations in the second quarter of 2023, but shares began to fall in after hours trading following an earnings call that offered shareholders little reassurance surrounding Tesla’s promised Cybertruck release and other production concerns.
Revenue for the quarter topped $24.97bn compared with analyst predictions of $24.7bn.
The report comes after Tesla slashed costs for its most popular vehicle models and drove a major increase in sales. Earnings were $0.91 a share compared with estimates of $0.79.
Investors were closely watching Tesla’s gross margins, monitoring if they were negatively affected by the company’s move to decrease consumer prices. The gross margin for the quarter was at 18.2% – representing a four-year low for Tesla but still higher than analyst expectations of 17.5%.
“Despite lower car prices, the company managed to mitigate the already-expected decline in margins, showcasing Elon Musk’s adeptness at steering the company through both prosperous and challenging times,” said Thomas Monteiro, a senior analyst at financial analysis site Investing.com.
Tesla produced 460,211 Model 3 compact cars and Model Y sport-utility vehicles – its mass-market models – compared with 345,988 in the same quarter last year and 19,489 deliveries of its Model S and Model X premium vehicles, compared with 16,411 at the same time last year.
Tesla shares initially rose marginally in after-hours trading following the promising report. But investors, who have been anxious for updates about Tesla’s Cybertruck model, may have been underwhelmed by executive responses about the sci-fi-inspired vehicle on the call.
The truck was announced in 2019 and has yet to reach the market. Earlier this week, Tesla posted an image on social media celebrating “the first Cybertruck built at Giga Texas!” But Musk said on the call that the company had only produced a “release candidate” model of the Cybertruck and that the vehicle is still in “tooling” phase. Musk reiterated that the model was on track for initial deliveries in 2023 and “high volume” distribution in 2024.
As is typical with Tesla earnings calls, Musk rattled off a number of lofty goals. In addition to stating the Cybertruck would be released by the end of the year, he said he saw a path to a “five or 10 times increase in valuation of Tesla” over time. He promised Tesla’s self-driving technology would be “10 times – possibly 100 times – safer than a human driver”. He also said Tesla was in talks with a major automaker about licensing the company’s full self-driving technology. “This is a big deal,” he said in a follow up tweet about the announcement.
Such a move would not be unprecedented, as Nissan, Ford and GM have partnered with Tesla to share the company’s electronic vehicle chargers in the past year. Musk argued that Tesla’s artificial intelligence capabilities would create a full self-driving vehicle technology that would be difficult to compete with, opening the market for AI-focused partnerships.
With shares falling in after-hours trading, it seems that participants on the call were perhaps not won over by Musk’s promises. Shareholders have previously expressed concern that Musk, who also owns SpaceX, Neuralink and Twitter, is stretched too thin in his leadership role. Musk announced the creation of yet another company this month, xAI, which he described as a “pro-humanity” artificial intelligence firm that will develop technology to be integrated at both Twitter and Tesla.
AI was a large focus of the earnings call, after Tesla said in its Wednesday report that to reach its goal of fully-autonomous vehicles, it must develop “four main pillars” at scale: “extremely large real-world datasets, neural net training, vehicle hardware and vehicle software”. In keeping with this goal, the company said it was starting production of Dojo – its neural net training computer that Musk first announced in 2021. Musk said in the call on Wednesday he anticipates Tesla will spend more than $1bn in the next year on Dojo, adding to concerns about the company’s expenditures and its gross margin.
