Tesla Q2 deliveries were higher-than-expected “greatly assuages concerns regarding softening EV demand,” CFRA Research analyst Garrett Nelson said.

Tesla stock price surge

As per Garrett Nelson, the Tesla stock price continues to ride a wave of positive momentum following its annual meeting in mid-June in which shareholders re-approved Elon Musk’s 2018 compensation plan.

Many feel that the Tesla shares rally and rebound and Q2 delivery figures were viewed by some analysts and investors as a sign of possible improvement ahead of its robotaxi reveal on Aug. 8. There are others who are worried that the EV maker is exhausting its “bag of tricks,” with Tesla going for price cuts and higher incentives.

Rise in Tesla’s Q2 deliveries

Tesla handed over 443,956 vehicles in the three months to June 30, 4.8% lower than a year earlier and up 14.8% from the preceding quarter.

Wall Street on average had expected the company to deliver 438,019 vehicles, according to 12 analysts polled by LSEG. Tesla delivered 422,405 Model 3 and Model Ys, and 21,551 units of other models, which include the Model S sedan, Cybertruck and Model X premium SUV. It produced 410,831 vehicles during the April-June period.

Tesla has been slow to refresh its car lineup at a time when rivals, especially in China, have come up with new affordable models, and as high interest rates dampen demand.

Investors supporting Musk’s pay package

Despite headwinds for its mainstay car business, investors overwhelmingly voted in favor of Musk’s record $56 billion pay package at the meeting. Board chair Robyn Denholm said prior to the vote that reinstating the pay package was necessary for “retaining Elon’s attention and motivating him.”

Musk said in a social media posting that Tuesday’s rally of Tesla stock is “small relative to vehicle autonomy and Optimus,” referring to his company’s self-driving cars and humanoid robots that he has said will significantly boost the EV maker’s market value once they become reality.

Tesla’s sales in China and U.S.

Tesla does not provide regional breakdown of sales, but some analysts said better-than-expected sales in China and the U.S. may have helped Tesla deliver stronger-than-expected results. In April, Tesla made another round of price cuts in key markets such as the United States, China and Europe.

Tesla offered loans with interest rates of zero or near zero percent on car purchases in China and the U.S. In the U.S. it heavily promoted its leasing plans, which make its vehicles eligible for $7,500 federal credits.

Chinese automakers said their sales grew by double-percentage points during the second quarter. BYD said its second-quarter sales of battery electric vehicles jumped 21% to 426,039.

Tesla’s China sales, which include domestic sales and exports to Europe and other countries, fell 17% in the second quarter from a year earlier. The company gave no breakdown on its China sales.

Tesla’s outlook

This marks the first time Tesla posted a year-on-year sales fall for a second consecutive quarter. Musk has said he expects the company to increase deliveries in 2024 from a year earlier. However, Wall Street largely expects a drop due to poor sentiment around EVs.

Tesla said in January that it expected “notably lower” growth in deliveries this year and dropped its goal of delivering 20 million vehicles a year by 2030.

Musk has promised to focus Tesla instead on self-driving cars, but some investors and experts remain skeptical that Tesla can perfect it anytime soon.

Tesla stock update

Tesla share was up 7.7% at a price of $226.11 on Tuesday afternoon. The stock have declined about 9% so far this year.

The post Tesla Share Price Rallies 10% on Strong Q2 Delivery Report appeared first on Industry Leaders Magazine.

Tesla is due to report financial results for the first quarter of 2024 after the US market close on Tuesday.

Tesla announces price cut

In a post on social media platform X, formerly Twitter, Elon Musk said “Tesla prices must change frequently in order to match production with demand”.

In China, the firm cut the starting price of the revamped Model 3 in China by 14,000 yuan ($1,934; £1,562) to 231,900 yuan.

Prices of the Model Y, Model X and Model S vehicles in the U.S. were cut by $2,000 (£1,616) on Friday.

There were also price cuts in many other countries in Europe, the Middle East and Africa, according to the Reuters news agency.

Tesla sale falls

The swathe of price cuts comes after the company reported this month that its global vehicle deliveries and sales in Q1 had fallen for the first time in nearly four years.

EV price war

A price war has been intensifying between EV makers, with particularly fierce competition coming from Chinese firms.

The company triggered an EV price war over a year ago when it aggressively cut prices at the expense of profit margins.

Tesla has been slow to refresh its ageing models while rivals in China, such as BYD and Nio, have been rolling out cheaper models. Chinese smartphone maker Xiaomi also launched its first EV last month.

Layoffs at Tesla

Last week, Tesla announced plans to lay off more than 10% of its global workforce, about 14,000 jobs.

Other issues faced by Tesla

On Friday, the firm recalled thousands of its new Cybertrucks over safety concerns.

It is because their accelerator pedals currently risk getting trapped by the interior trim, increasing the possibility of crashes. Musk has also faced criticisms from investors who say he is stretched too thin after his purchase of the social media platform Twitter, which he renamed X, in 2022. Meanwhile, Tesla has asked its shareholders to vote in favor of Musk’s $56bn pay package, which was rejected this year by a judge who called it an “unfathomable sum”.

“This is another black eye for Tesla, which has added to the chaos going on for Musk,” said Dan Ives, senior equity analyst at Wedbush Securities. “Cybertruck is the pedestal moment and a recall out of the gates is a bad look.”

The price cuts ended a chaotic week for Tesla.

Tesla stock update

Tesla shares fell below $150 this week, wiping away all gains the company made in the past year. Tesla’s shares have fallen by more than 40% since the start of this year. 

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This was as reported in the company’s last financial filing for the third quarter of 2023, this making him Tesla largest shareholder. That’s a large stake, especially considering that Musk sold tens of billions of dollars worth of his shares in Tesla in 2022, largely to finance a $44 billion leveraged buyout of Twitter.

Tesla voting control for AI and robot

Now, Musk is angling for even more voting control over Tesla.

Specifically, Musk wrote on Monday, “I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned.”

“Unless that is the case, I would prefer to build products outside of Tesla,” the billionaire executive said on X.

“You don’t seem to understand that Tesla is not one startup, but a dozen.

In a separate post, he said he would be fine with a dual class voting structure to achieve his goal of getting 25% voting control for Tesla, but was told it was impossible after the initial public offering in Delaware.

Tesla did not immediately respond to a request for comment.

Tesla AI and robotics company

Musk’s post stood at odds with remarks he previously made suggesting Tesla is already an important AI and robotics company, and its value hinges on its prowess in these domains.

In April 2022, Musk predicted during Tesla’s first-quarter earnings call that the company’s humanoid robot, Optimus, “ultimately will be worth more than the car business and worth more than full self-driving.”

Tesla unveiled an early Optimus prototype at Tesla AI Day in September that year.

Importance of automotive segment

While Tesla’s last annual or 10-K filing showed that around 95% of its revenue came from its “automotive” segment in 2022, in its third-quarter 2023 financial filing, the company described its business as “increasingly focused on products and services based on artificial intelligence, robotics and automation.”

Even on Monday morning, Musk posted a video clip on X showing the Tesla Optimus robot in development folding laundry at a table, although the robot was remote-operated and not autonomous.

Musk’s wish to control even more of Tesla will undoubtedly add to the pressure on Tesla’s board of directors in 2024.

The reason for his call for 25% voting control in Tesla, he said: “If I have 25%, it means I am influential, but can be overridden if twice as many shareholders vote against me vs for me. At 15% or lower, the for/against ratio to override me makes a takeover by dubious interests too easy.”

Delaware trial

Musk who is in the midst of a trial in Delaware over his earlier $56 billion pay package from Tesla. The unparalleled 2018 CEO compensation plan made Musk into one of the richest people on the planet.

Shareholders previously sued Musk and Tesla in Delaware alleging that Musk’s earlier, 2018 pay package was excessive, and the board authorizing it amounted to a breach of fiduciary duty. 

In an earlier trial in Delaware, several Tesla board members agreed last year to pay back $735 million to the company in a settlement agreement over their own director compensation.

Hertz selling Tesla

Another blow to Tesla earlier this week when Hertz the rental car company came out with the plan of selling Teslas for as little as $21,000.

Tesla price cut has made it increasingly affordable, putting pressure on the used car segment.

The post Elon Musk Is Looking To Get 25% Voting Control of Tesla appeared first on Industry Leaders Magazine.

Tesla’s price cut impacted profit

Net income for the Q2 surged 20 percent to $2.7 billion while total revenue, including its solar business, gained 47 percent to $24.9 billion.

When Tesla’s profit report was shared on Wednesday, Wall Street analysts were expecting its automotive gross margin to come in at around 20%, according to the average of estimates compiled by Bloomberg. That would be a drop in Tesla’s profit from around 28% in the same period a year ago.

Vehicle production rose 86 percent to nearly 479,700 vehicles while deliveries were up 83 percent to 466,140 units.

But Tesla’s profit fell in the Q2 from the previous three months, squeezing Tesla’s price cut, efforts to boost sales.

Tesla facing scrutiny

Tesla’s considerable price cut on its vehicles have helped boost sales for Tesla but have weighed in on Tesla’s profitability. With the stock trading at 70 times forward earnings compared to around 5.8 times for General Motors Co. and about 8 times for Ford Motor Co. Tesla faces scrutiny as to how it can maintain the lead in a market of slowing sales and rising inventories.

Ivana Delevska, chief investment officer at SPEAR Invest, said in an interview. “If Tesla can’t deliver on margins, the rally could stall out, as Tesla’s investors would question the strategy to cut prices.”

Under pressure from increasing competition and an uncertain economy, Tesla’s price cut, increased discounts with other incentives to reduce inventory were introduced.

Market valuation of Tesla

Tesla’s price cut along with government tax breaks for EV buyers in the U.S. and elsewhere, ate into Tesla’s profit whose margins have long been the envy of the auto industry.

Tesla reported gross margin of 18.2 percent for the April-June period, compared with 19.3 percent for the Q1. Gross margin in the Q2 of 2022 was 25 percent.

Tesla said it was focusing on reducing costs and on new product development, and that the “challenges of these uncertain times are not over.”

The company said lower raw-material costs and government tax credits helped with Tesla’s price cut for vehicle.

The company did not break out its automotive margin, a closely watched gauge of Tesla’s profitability which was more than 30 percent at the start of last year.

On an adjusted basis, Tesla earned 91 cents per share. Tesla analyst estimates a profit of 82 cents per share, according to Refinitiv IBES data.

Tesla’s profit may end up being a sideshow if Elon Musk, the CEO gives Tesla investors highly anticipated updates on new products, refreshes of existing vehicles and AI. A sign that margins can start improving from here on can also provide another boost to the stock. Wedbush analyst Daniel Ives expects Tesla’s Q2 revenue to mark the trough for margins.

Tesla reiterated that it expects to achieve deliveries of around 1.8 million vehicles this year.

Tall order

The automaker had predicted in October it would sell every car it manufactured in the foreseeable future but in the Q2 it produced 13,560 more vehicles than it delivered. That number, though, was narrower than Q1 revenue.

Tesla said global inventory is now 16 days of supply, up from 15 days last quarter and four days a year ago.

Tesla Cybertruck

Analysts have said new models, such as the Cybertruck, could help Tesla maintain its extraordinary sales-growth rate. However, the long-awaited truck likely will not be available in large volumes until next year. The first Cybertruck rolled off the line in Tesla’s Austin factory just recently, the company said over the weekend.

Stock at closing

Tesla analyst estimates average profit for the three months ended in June has dropped by 26% since mid-January. Those slumping expectations contrast sharply with the more than 140% rally in the stock this year that has lifted market valuation of Tesla above $940 billion. The shares are trading up as much as 1.4% Wednesday ahead of the results.

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