Tesla Slumps Post-Earnings as Auto Struggles Outweigh AI Promise
Tesla AI Vision
The prolific Elon Musk is repositioning Tesla an Artificial Intelligence company, in a strategy spearheaded by autonomous driving and humanoid robots. He envisions something between Uber and Airbnb, with an autonomous ride hailing fleet consisting of purpose-built robotaxis and regular Tesla's "lent" by their owners. But Mr Musk goals once again appear overly optimistic and he has a track record of missing deadlines. Furthermore, he downplays regulatory hurdles and pushed back the unveiling of the robotaxi for October, in an event that could have offered more clarity on the vehicles specs.
The company is also making fast progress on its humanoid robots, with Optimus already performing tasks in on of Tesla's facilities. Mr Musk foresees several thousand robots doing useful things in Tesla's factories by the end of the year, before ramping production in 2026 and selling to outside customers.
Automotive Struggles
Tesla is facing a challenging environment amidst a broader EV adoption slowdown, increasing competition and aging lineup. Despite the sequential bounce, Q2 deliveries dropped on a yearly basis for second straight quarter, underscoring weak demand. Aging lineup, increasing competition, high interest rates and broader EV adoption slowdown are among the culprits.
To alleviate the problem Tesla has resorted to price cuts and financing deals, but those harm its top and bottom lines. Even though overall revenues increased to new records in Q, those of the automotive segment dropped 7% y/y. Profits nearly halved and margin remained suppressed.[1]
Stock Reaction
TSLA.us had gone on its best profitable streak of the year after the sequential increase in Q2 deliveries, which brought back some optimism around the automotive business. However, that rally must have been to a certain extent tied to autonomous driving promise and the delay of the robotaxi casts doubt.
Elon Musk once again tied Tesla's future to AI, autonomous driving and humanoids during the Q2 earnings call this week [1], which can unlock tremendous value, but they are not here yet. In the present, Tesla struggles as a car company and the Q2 results were a clear reminder. The stock erased around $30/share and more than 12% after the report, as markets reacted negatvely. Remains to be seen if the promise of AI (and affordable EVs) is sufficient to support the stock until these plan materialize.
Nikos Tzabouras
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. With extensive experience in market analysis and a strong foundation in international relations, he brings a unique perspective to financial markets. Nikos emphasizes not only technical analysis but also on fundamentals and the growing influence of geopolitics on financial trends.
As a Senior Financial Editorial Writer, he delivers comprehensive and forward-looking insights across a wide range of asset classes, including equities, commodities, and currencies. His work explores how macroeconomic events, political developments, and global policies impact market dynamics, providing readers with a deeper understanding of both short-term movements and long-term trends.
References
| Retrieved 25 Jul 2024 https://digitalassets.tesla.com/tesla-contents/image/upload/IR/TSLA-Q2-2024-Update.pdf |
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