Tesla (TSLA) earnings Q2 2023

Elon Musk, CEO of SpaceX, Twitter and electric car maker Tesla looks on as he speaks during his visit to the Vivatech technology startup and innovation fair at the Porte de Versailles exhibition center in Paris June 16, 2023.

Alain Jocard | Afp | Getty Images

Tesla reported earnings after the close and showed record quarterly sales but lower margins thanks to price cuts and stimulus.

The stock price was flat after the initial report, but began falling during the earnings call as CEO Elon Musk and other executives failed to provide precise specifications and delivery dates for the cybertruck and a Robotaxi-enabled vehicle. Musk and other executives also said during the call that vehicle production will decline in the third quarter due to shutdowns for factory improvements. It’s now down about 5% in after-hours trading.

Here’s how the company performed versus expectations:

  • Revenue: $24.93 billion, versus $24.47 billion expected by Refinitiv.
  • Merits: Adjusted 91 cents per share versus 82 cents per share expected according to Refinitiv.

Net income (GAAP) was $2.70 billion, up 20% year over year. Operating income, however, was $2.40 billion, down 3% from the year-ago quarter.

For comparison, in the first quarter of 2023, Tesla reported net income of $2.51 billion on sales of $23.33 billion. In the second quarter of last year, Tesla reported net income of $2.27 billion on sales of $16.93 billion.

Commenting on the company’s earnings announcement, Musk said, “We continue to target 1.8 million vehicle deliveries this year, but expect production to slow somewhat in the third quarter as we have shutdowns over the summer for numerous plant upgrades.”

Earlier this month, Tesla reported 466,140 total vehicle deliveries for the second quarter and said it had produced 479,700 electric vehicles. The deliveries come closest to the sales reported by Tesla.

These shipments were higher than Wall Street had anticipated and were due in part to incentives and rebates. As a result, operating margins were 9.6%, the lowest in at least five quarters. Total gross margin was 18.2%, also a low for the same period.

Tesla explained in a shareholder forum that the lower margins in the second quarter were due to lower average selling prices “due to the mix and pricing” of the cars sold, as well as the cost of ramping up production of in-house developed battery cells, known as 4680 cells among others .

Revenue from Tesla’s core automotive business rose 46% year over year to $21.27 billion, up about 6.5% sequentially. Revenue from energy generation and storage — from solar arrays and backup batteries — grew 74% year over year to $1.51 billion. With more vehicles on the road, Tesla’s “services and other” revenue, which includes fees for out-of-warranty vehicle repairs, rose 47% to $2.15 billion.

Asked whether investors can expect Tesla’s automotive gross margins to stabilize or increase in the near future following price cuts and factory improvements, Musk disagreed. “The short-term variances in gross margin and profitability are really small compared to the long-term picture. Autonomy will make all those numbers look silly.”

Tesla’s research and development expenses rose to $943 million (up from $771 million in the first quarter) after the company wrote in a shareholder forum that it was focused on “being at the forefront of AI development ‘ and started producing his ‘Dojo Training’ computer.”

Tesla’s crossover, the Model Y, became the best-selling vehicle worldwide in the first quarter of 2023.

Tesla said in an investor presentation that Cybertruck’s “factory tools” are on the right track, but the company has only produced “release candidate” builds so far. The news could disappoint fans who are eagerly awaiting the start of deliveries of the angular, sci-fi-inspired pickup truck that Elon Musk first promoted in 2019. In recent days, Tesla posted a photo via its social media account on Twitter showing factory workers crowded around a cybertruck at their Austin, Texas plant. The tweet read, “First Cybertruck built at Giga Texas!”

At the earnings announcement, Musk said the Cybertruck would feature a lot of “new technology” with 10,000 “unique parts and processes.” Subject to the caveat that “it’s always difficult to predict the ramp initially,” Tesla will be mass-producing the Cybertruck “next year, and we’ll be delivering the car this year.”

Musk also said that Tesla will spend more than $1 billion on Dojo over the next year. Dojo is a supercomputer that Tesla is developing for AI machine learning and computer vision training purposes. Tesla sucks up video clips and data from its customers’ and companies’ vehicles to improve existing software and develop new features that become part of its driver assistance systems.

“You see a lot of AI companies doing LLMs and what not, and I’m like, if they’re that great, why can’t they build a self-driving car? Because it’s harder!”

Musk has been promising that Tesla would bring a self-driving car to market since at least 2016, promising at the time that by 2017 a Tesla could complete a cross-country trip without driver intervention. So far this has not happened . The company’s driver assistance systems, marketed in the US as Autopilot or Full Self-Driving Capability, require a human driver who is ready to steer or brake at all times.

“I know I’m the boy who cried FSD,” Musk said during a question-and-answer session on Wednesday. “But I think by the end of this year we’ll be better than humans.” He said Tesla is focused on developing self-driving technology for the US market.

More futuristically, Musk talked about combining a Neuralink brain implant with a Tesla robotic arm or leg. Of amputees, he said, “We believe we can give.” [them] a cyborg body that’s incredibly capable — a six million dollar man in real life, but it won’t cost six million dollars.” He joked, “Sixteen thousand dollar man.”

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