Tesla’s first-quarter net income plummeted 55%, but its stock price surged in after-hours trading Tuesday as the company said it would accelerate production of new, more affordable vehicles.
The Austin, Texas, company said it made $1.13 billion from January through March compared with $2.51 billion in the same period a year ago.
Investors and analysts were looking for some sign that Tesla will take steps to stem its stock's slide this year and grow sales. The company did that in a letter to investors Tuesday, saying that production of smaller, more affordable models will start ahead of previous guidance.
The smaller models, which apparently include the Model 2 small car that is expected to cost around $25,000, will use new generation vehicle underpinnings and some features of current models. The company said it would be built on the same manufacturing lines as its current products.
On a conference call with analysts, CEO Elon Musk said he expects production to start in the second half of next year “if not late this year.”
New factories or massive new production lines won't be needed for the new vehicles, Musk said.
“This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times,” the investor letter said.
But Musk gave few specifics on just what the new vehicles will be and whether they would be variants of current models. “I think we’ve said all we will on that front,” he told an analyst.
He did say that he expects Tesla to sell more vehicles this year than last year's 1.8 million.
The company also appears to be counting on a vehicle built to be a fully autonomous robotaxi as the catalyst for future earnings growth. Musk has said the robotaxi will be unveiled on Aug. 8.
Shares of Tesla rose 11% in trading after Tuesday’s closing bell, but they are down more than 40% this year. The S&P 500 index is up about 5% for the year.
Morningstar analyst Seth Goldstein said the company gave guidance about its future that was clearer than in the past, allaying investor concerns about production of the Model 2 and future growth. “I think for now we're likely to see the stock stabilize," he said. “I think Tesla provided an outlook today that can make investors feel more assured that management is righting the ship.”
But if sales fall again in the second quarter, the guidance will go out the window and concerns will return, he said.
Tesla reported that first-quarter revenue was $21.3 billion, down 9% from last year as worldwide sales dropped nearly 9% due to increased competition and slowing demand for electric vehicles.
Excluding one-time items such as stock-based compensation, Tesla made 45 cents per share, falling short of analyst estimates of 49 cents, according to FactSet.
The company’s gross profit margin, the percentage of revenue it gets to keep after expenses, fell once again to 17.4%. A year ago it was 19.3%, and it peaked at 29.1% in the first quarter of 2022.
Over the weekend, Tesla lopped $2,000 off the price of the Models Y, S and X in the U.S. and reportedly made cuts in other countries including China as global electric vehicle sales growth slowed. It also slashed the cost of “Full Self Driving” by one third to $8,000.
Tesla also announced last week that it would cut 10% of its 140,000 employees, and Chief Financial Officer Vaibhav Taneja said Tuesday the cuts will be across the board. Growth companies build up duplication that needs to be pruned like a tree to continue growing, he said.
Musk has been touting the robotaxi as a growth catalyst for Tesla since the hardware for it went on sale late in 2015.
In 2019, Musk promised a fleet of autonomous robotaxis by 2020 that would bring income to Tesla owners and make their car values appreciate. Instead, they've declined with price cuts, as the autonomous robotaxis have been delayed year after year while being tested by owners as the company gathers road data for its computers.
Neither Musk nor other Tesla executives on Tuesday's call would specify when they expect Tesla vehicles to drive themselves as well as humans do. Instead, Musk touted the latest version of Tesla’s autonomous driving software — which the company misleadingly brands as “Full Self Driving” despite the fact that it still requires human supervision — and said that “it’s only a matter of time before we exceed the reliability of humans, and not much time at that.”
It didn’t take the Tesla CEO long to begin expounding on the possibility of turning on self-driving capabilities for millions of Tesla vehicles at once, although again without estimating when that might actually occur. He went on to insist that “if somebody doesn’t believe that Tesla is going to solve autonomy, I think they should not be an investor in the company.”
Early last year the National Highway Traffic Safety Administration made Tesla recall its “Full Self-Driving” system because it can misbehave around intersections and doesn’t always follow speed limits. Tesla's less-sophisticated Autopilot system also was recalled to bolster its driver monitoring system.
Some experts don't think any system that relies solely on cameras like Tesla's can ever reach full autonomy.
Hamilton contributed to this report from San Francisco.
FILE - The logo for the Tesla Supercharger station is seen in Buford, Ga, April 22, 2021. Faced with falling global sales and a tumbling stock price, Tesla has slashed prices again on some of its electric vehicles and its “Full Self Driving” system. Tesla releases first-quarter earnings Tuesday, April 23, 2024. (AP Photo/Chris Carlson, File)
LONDON (AP) — Britain's governing Conservative Party suffered heavy losses in local election results Friday, further cementing expectations that the Labour Party will return to power after 14 years in a U.K. general election that will take place in the coming months.
Labour won control of councils in England that the party hasn’t held for decades, and was successful in a special election for a seat in Parliament.
If those results are repeated in the general election, it would lead to one of the Conservatives' biggest-ever defeats.
Though the results overall, admittedly on a low turnout, make for grim reading for Prime Minister Rishi Sunak, he was able to breathe a sigh of relief when the Conservative mayor of Tees Valley in the northeast of England was reelected, albeit with a depressed share of the vote. The victory of Ben Houchen, who ran a very personal campaign, may be enough to cushion Sunak from any revolt by Conservative lawmakers.
For Labour leader Keir Starmer, it's generally been a stellar set of results, though in some areas with large Muslim populations, such as Blackburn and Oldham in northwest England, the party's candidates appear to have suffered as a result of the leadership's strongly pro-Israel stance in the war in Gaza.
Perhaps most important in the context of the general election, which has to take place by January but could come next month, Labour won back the parliamentary seat of Blackpool South in the northwest of England. The seat had gone Conservative in the last general election in 2019, when then Prime Minister Boris Johnson made big inroads in Brexit-supporting parts of the country.
In the contest, triggered by the resignation of a Conservative lawmaker following a lobbying scandal, Labour’s Chris Webb secured 10,825 votes, against the second-placed Conservative opponent's 3,218. The swing from Conservative to Labour, at 26%, was one of the biggest since World War II — more than enough to see the party return to power for the first time since it was ejected in 2010.
Starmer went to Blackpool, a coastal resort town, to congratulate Webb and urged Sunak to call a general election. Sunak has the power to decide on the date, and has indicated that it will be in the second half of 2024.
“This was directly to Rishi Sunak to say we are fed up with your decline, your chaos and your division and we want change," Starmer said.
Thursday’s elections in large parts of England were important in themselves, with voters deciding on who runs many aspects of their daily lives, such as garbage collection, road maintenance and local crime prevention, in the coming years. But with a national election looming, they are being viewed through a national prism.
John Curtice, professor of politics at the University of Strathclyde, said that the Conservatives are losing around half of the seats they are defending.
“We are probably looking at certainly one of the worst, if not the worst, Conservative performances in local government elections for the last 40 years,” he told BBC radio.
By late evening Friday, with more than half of the 2,661 seats up for grabs counted, the Conservatives were down by more than 410 while Labour was up by nearly 170. Other parties, such as the centrist Liberal Democrats and the Green Party also made gains. Reform U.K., which is trying to usurp the Conservatives from the right, also had some successes, notably in Blackpool South, where it was less than 200 votes from grabbing second place.
Labour won in areas that voted for Britain's departure from the European Union in 2016 and where it had been crushed by Brexit-backer Johnson, such as Hartlepool in the northeast of England, and Thurrock in southeast England. It also seized control of Rushmoor, a leafy and military-heavy council in the south of England where it had never won.
One bright spot for Sunak was the result in Tees Valley, which prior to Brexit had been a traditional Labour stronghold.
Sunak struck a defiant note in Teesside as he congratulated Houchen, whose share was down nearly 20 percentage points from 2021 to 54%, while admitting “disappointing” results elsewhere.
“I’ve got a message for the Labour Party too, because they know that they have to win here in order to win a general election, they know that," he said. "They assumed that Tees Valley would stroll back to them, but it didn’t.”
Sunak will be hoping Andy Street will remain mayor of the West Midlands when that result is announced on Saturday. Labour's Sadiq Khan is expected to remain London's mayor, though there are some concerns being voiced that a low turnout may see him lose to Conservative opponent Susan Hall.
Sunak became prime minister in October 2022 after the short-lived tenure of his predecessor, Liz Truss, who left office after 49 days following a budget of unfunded tax cuts that roiled financial markets and sent borrowing costs for homeowners surging.
Her chaotic — and traumatic — leadership compounded the Conservatives' difficulties following the circus surrounding her predecessor Johnson, who was forced to quit after being adjudged to have lied to Parliament over coronavirus lockdown breaches at his offices in Downing Street.
Nothing Sunak has tried to do has shifted the political dial, with Labour consistently 20 percentage points ahead in opinion polls. Whether anyone else can do better than Sunak is a question that may occupy the minds of nervous Conservative lawmakers in Parliament heading into the weekend.
Britain's Liberal Democrat leader Sir Ed Davey, left, is congratulated by a local supporter in Winchester, England, following the results in local government elections, Friday May 3, 2024. (Stefan Rousseau/PA via AP)
Britain's Labour Party leader Sir Keir Starmer, center, and shadow chancellor Rachel Reeves, celebrate with David Skaith at Northallerton Town Football Club, North Yorkshire, after winning the York and North Yorkshire mayoral election, Friday May 3, 2024. (Owen Humphreys/PA via AP)
Conservative party candidate Lord Ben Houchen, left, with Britain's Prime Minister Rishi Sunak following his re-election as Tees Valley Mayor in Teesside, England, Friday May 3, 2024. (Owen Humphreys/PA via AP)
Britain's Prime Minister Rishi Sunak presents an award to a member of the Parachute Regiment as he visits the Helles Barracks at the Catterick Garrison, a military base in North Yorkshire, Britain, Friday, May 3, 2024. (Molly Darlington/Pool photo via AP)
Britain's Prime Minister Rishi Sunak looks on as he inspects the Passing Out Parade of the Parachute Regiment recruits as he visits the Helles Barracks at the Catterick Garrison, a military base in North Yorkshire, Britain, Friday, May 3, 2024. (Molly Darlington/Pool photo via AP)
Britain's Prime Minister Rishi Sunak speaks as he takes part in broadcasting a clip during his visit to the Helles Barracks at the Catterick Garrison, a military base in North Yorkshire, Britain, Friday, May 3, 2024. (Molly Darlington/Pool photo via AP)
Britain's Prime Minister Rishi Sunak smiles as he inspects the Passing Out Parade of the Parachute Regiment recruits during his visit to the Helles Barracks at the Catterick Garrison, a military base in North Yorkshire, Britain, Friday, May 3, 2024. (Molly Darlington/Pool photo via AP)
Britain's Prime Minister Rishi Sunak speaks as he takes part in broadcasting a clip during his visit to the Helles Barracks at the Catterick Garrison, a military base in North Yorkshire, Britain, Friday, May 3, 2024. (Molly Darlington/Pool photo via AP)
A woman holds an umbrella as she walks on Westminster Bridge over the River Thames with the clock face of Queen Elizabeth Tower in the background in London, Friday, May 3, 2024. Britain's governing Conservative Party is suffering heavy losses as local election results pour in Friday, piling pressure on Prime Minister Rishi Sunak ahead of a U.K. general election in which the main opposition Labour Party appears increasingly likely to return to power after 14 years. The Queen Elizabeth Tower holds the bell known as Big Ben. (AP Photo/Kin Cheung)
Tourists on a cycle tour in wet weather plastic macs, cycle past the Houses of Parliament, in London Friday, May 3, 2024. Britain's governing Conservative Party is suffering heavy losses as local election results pour in Friday, piling pressure on Prime Minister Rishi Sunak ahead of a U.K. general election in which the main opposition Labour Party appears increasingly likely to return to power after 14 years. (AP Photo/Kin Cheung)
A general view of the Houses of Parliament from across the River Thames in London, Friday, May 3, 2024. Britain's governing Conservative Party is suffering heavy losses as local election results pour in Friday, piling pressure on Prime Minister Rishi Sunak ahead of a U.K. general election in which the main opposition Labour Party appears increasingly likely to return to power after 14 years. (AP Photo/Kin Cheung)
A woman holds an umbrella as she walks along the banks of the River Thames opposite the Houses of Parliament in London, Friday, May 3, 2024. Britain's governing Conservative Party is suffering heavy losses as local election results pour in Friday, piling pressure on Prime Minister Rishi Sunak ahead of a U.K. general election in which the main opposition Labour Party appears increasingly likely to return to power after 14 years. (AP Photo/Kin Cheung)
Newly elected British Labour MP Chris Webb, right, with Labour leader Sir Keir Starmer celebrating at Blackpool Cricket Club, England, Friday May 3, 2024 after being declared winner in the Blackpool South by-election. The by-election was triggered after the resignation of Scott Benton. (Peter Byrne/PA via AP)
Labour candidate Chris Webb celebrates after winning the Blackpool South by-election following the count at Blackpool Sports Centre in Blackpool, Britain, Friday, May 3, 2024. (Peter Byrne/PA via AP)
Labour candidate Chris Webb celebrates after winning the Blackpool South by-election following the count at Blackpool Sports Centre in Blackpool, Britain, Friday, May 3, 2024. (Peter Byrne/PA via AP)
FILE - A woman leaves a polling station after voting in London, Thursday, May 2, 2024. Britain's governing Conservative Party is suffering heavy losses as local election results pour in Friday, piling pressure on Prime Minister Rishi Sunak ahead of a U.K. general election in which the main opposition Labour Party appears increasingly likely to return to power after 14 years. (AP Photo/Kin Cheung, File)
Counting begins at the Blackpool South by-election at Blackpool Sports Centre in Blackpool, England, Thursday, May 2, 2024. The by-election was triggered after the resignation of Scott Benton. (Peter Byrne/PA via AP)
FILE - A woman pushes a buggy as she arrives to vote at a polling station in London, Thursday, May 2, 2024. Britain's governing Conservative Party is suffering heavy losses as local election results pour in Friday, piling pressure on Prime Minister Rishi Sunak ahead of a U.K. general election in which the main opposition Labour Party appears increasingly likely to return to power after 14 years. (AP Photo/Kin Cheung, File)
