Elon Musk promises “more affordable” EVs as rival discounts hit Tesla’s profits

Elon Musk has promised that Tesla will deliver a “more affordable” electric vehicle in early 2025, after he admitted that discounts and increased competition were the main reasons for a significant drop in second-quarter profits.

Tesla’s share price took a hit on Tuesday (US time) after the company released its second-quarter earnings, which revealed a 45 percent drop in profit despite strong growth in the energy sector, mainly due to growing demand for Tesla’s Megapack. grid-scale battery product.

Total automotive revenue fell 7 percent in the second quarter compared to the same period a year ago, while companywide revenue came in at $25.5 billion, up 2 percent, despite revenue falling below $1.5 billion. , a 45 percent drop compared to the same quarter in 2023.

In line with vehicle shipments, Tesla’s second quarter was an improvement over the first quarter of the year, with companywide revenue up nearly 20 percent, automotive revenue up 15 percent and profits up 36 percent. percent.

Tesla shares fell about 2 percent, continuing to increase pressure on the company to demonstrate it can grow despite sporadic demand for electric vehicles.

“Plans for new vehicles, including more affordable models, remain on track to begin production in the first half of 2025,” the company told investors, explaining that these new vehicles “will use aspects of next-generation platform as well as aspects of our current platforms and will be able to be produced on the same production lines as our current vehicle line.”

Musk didn’t say much more about it on the earnings call. “We don’t want to get too much into the product roadmap here because that’s reserved for product announcement events, but we will, in fact, be offering a more affordable model in the first half of next year,” he said. he. .

Tesla is currently focused on its best-selling cars, the Model 3 and Model Y, which it has been forced to discount to keep pace with competition, particularly from Chinese EV makers and its biggest rival BYD. It’s also making the Cybertruck, the Tesla Semi, and Musk says the long-awaited new Roadster should hit the market by the end of next year.

Tesla acknowledged that “the rate of vehicle volume growth in 2024 may be significantly lower than the growth rate achieved in 2023,” but sought to reassure investors that this was in part due to a focus “on the launch of next generation vehicle and other products.

However, Musk was keen to focus on autonomy, which means the launch of “Full Self-Driving”, the arrival of “Rob-taxis” and the development of his Optimus humanoid robot that Musk says will perform “useful tasks”. in Tesla. production lines by the end of next year, and may even be on offer to other companies in 2026.

The long-awaited Artificial Intelligence Day, which was scheduled for August 8, has not been scheduled for October 10. “The big differentiator, really, by far, the biggest one for Tesla is autonomy,” Musk said. The reason for this is simple, it leads to high market valuations, with Musk noting that Ark Energy gave it a potential $5 trillion valuation based on the success of AI.

“In addition, we have economies of scale and are the most efficient electric vehicle manufacturer in the world,” Musk noted.

Musk said the AI ​​day was delayed because “I wanted to make some important changes that I think will improve the vehicle.” He hinted that “we’re going to show a few more things.”

Musk was happy with the energy business, which is the company’s strongest part at the moment, and was recently valued by Morgan Stanley at more than $250 billion – more than the value of any Australian listed company.

In the second quarter, it delivered revenue of $2.5 billion and helped the company beat analysts’ estimates, at least on the revenue line. “Both Megapack and Powerwall achieved record deployments in the second quarter, resulting in 9.4 GWh of total storage deployments,” he said.

“Overall, the Energy business achieved record revenue and gross profit in the second quarter. The Lathrop Megafactory continues to grow successfully, achieving a production record in the second quarter, and the Shanghai Megafactory remains on track to start production in the first quarter of 2025.

As for the future, Tesla describes itself as “between two major growth waves,” the first being the release of the Model 3 and Model Y, and the second being the rollout of autonomy and the next-generation EV.

“In 2024, the growth rates of energy storage deployments and revenue in our Energy Generation and Storage business should exceed the Automotive business.”