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Deals to let other auto makers charge EVs at Tesla’s supercharging network helped Tesla stock in the second quarter. William West/AFP via Getty Images
Tesla beat the Street by earning 91 cents a share in the second quarter, but shares of the electric vehicle maker have barely budged in after-hours trading.
The lack of reaction doesn’t mean that things are getting easier for the EV leader.
New car prices and profit margins slid again. The decline was expected but selling electric cars is a lot tougher in 2023 than it was in 2022. Tesla’s (ticker: TSLA) results highlight the problem the entire auto industry is having moving electric vehicles off the lot as the number of models proliferate and inventories rise along with interest rates. “We’re in turbulent times,” said CEO Elon Musk on the company’s earnings conference call.
Tesla reported Q2 operating income of $2.4 billion on sales of $24.9 billion. Wall Street was looking for operating profit of $2.7 billion, earnings of 80 cents a share, and sales of $24.2 billion.
Gross profit margins in the car business, excluding regulatory credit sales, came in at 18.1%, compared with 18.8% in the first quarter of 2023. Wall Street was looking for margins to fall between 18% and 19%. No surprise there.
First-quarter gross profit margins fell 11 percentage points year over year amid steep price cuts implemented by Tesla at the start of 2023.
Operating profit margins dipped below 10% for the first time since the first quarter of 2021. Operating profit margins came in at 14.6% in the second quarter of 2022. Lower vehicle prices, higher costs for battery production, and a weaker U.S. dollar were responsible for the margin drop.
The average price of a Tesla vehicle in the second quarter came in at just over $45,000, down a touch from the first quarter and down from almost $56,000 in the second quarter of 2022.
Lower profitability isn’t great news but results were still solid. CFRA analyst Garrett Nelson called the release “uneventful” in a Wednesday report. He rates shares Buy and has a $325 price target for the stock.
Investors, at least initially, agree with that sentiment. Tesla shares bobbed up and down in after-hours trading, little changed, shortly after the numbers were released. Shares closed at $291.26, down 0.7% in regular trading while the S&P 500 closed up 0.2%. The Nasdaq Composite was flat.
The lack of a stock price reaction is a surprise. Tesla stock has moved an average of roughly 7.5% up or down after reporting numbers in after-hours trading over the past decade. The smallest reaction to earnings was down 0.6% after Tesla reported fourth-quarter 2018 numbers.
Tesla’s price cuts were “near-term pain for long-term gain strategic move,” wrote Wedbush analyst Dan Ives in a recent report. They worked. Volumes jumped. Tesla delivered about 423,000 vehicles in the first quarter and 466,000 vehicles in the second quarter. Both were a record when reported.
First-half 2023 deliveries of 889,015 units rose about 57% from a year earlier.
“Now it’s all about margins trough, no more price cuts, and demand remaining firm with some Model 3 and Y refreshes also likely on the horizon followed by the drumroll for the Cybertruck later this year,” Ives added.
Tesla produced the first Cybertruck at its plant in Austin, Texas, over the weekend. The next expansion of Tesla’s product lineup and the speed at which Tesla can ramp up production will be important to investors in the second half of the year.
“Cybertruck has a lot of new technology in it,” said Musk on the conference call, adding Tesla will be making the truck at high volumes in 2024.
Cybertruck enters a crowded market for electric trucks. Ford Motor (F) and Rivian Automotive (RIVN) are selling pickups now. General Motors (GM) expects to deliver its all-electric Chevy Silverado to commercial customers in coming weeks.
Through Wednesday trading, Tesla stock has added some 137% year to date. Deals with other auto makers opening up its supercharging network to non-Tesla EVs as well as optimism about artificial-intelligence-related businesses have helped shares recently. Tesla uses AI to train its autonomous-driving features.
The lack of stock market reaction might mean Tesla results threaded the needle. Investors will have to wait and see what happens on Thursday.
Write to Al Root at [email protected]
