Tesla misses profit estimates as Elon Musk delays ‘robotaxi’ launch

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Tesla's earnings dropped by 45 percent in the second quarter due to a decrease in sales, increased expenses from layoffs, and higher investments in its AI technology.

Elon Musk, the billionaire CEO of Tesla, announced during the company's latest earnings report that the unveiling of Tesla's autonomous taxi fleet, known as "robotaxis," has been officially postponed.

Even though the project to transform all Tesla vehicles into a large autonomous fleet was pushed back from August to October, Musk suggested that it could significantly increase the company's valuation to $5tn, which is six times higher than its current market value.

Tesla earned $1.47 billion in profit during the second quarter, which was lower than the expected consensus estimate of $1.9 billion from analysts. As a result, the company's shares dropped by more than 8% in trading after hours.

Sales increased by 2 percent, reaching $25.5 billion, slightly surpassing predictions. This growth was fueled by a record-breaking performance in the energy storage sector and a surprisingly high amount of regulatory credits linked to emissions regulations.

The company that produces batteries for residential and commercial use increased its energy storage deployment to 9,400 megawatt hours in the second quarter, more than twice as much as the previous quarter.

Yet, Tesla saw a significant increase in their operating costs by 39 percent in the quarter, reaching nearly $3 billion. In April, they revealed their decision to reduce their workforce by 10 percent, around 14,000 employees, resulting in extensive expenses for restructuring and legal matters.

Tesla has been putting a lot of money into its AI technology, which includes expanding its "gigafactory" in Texas. They plan to equip it with 50,000 powerful H100 supercomputer chips to train their self-driving technology.

Tesla's profit margin decreased to 18 percent in the quarter, from its highest point of 29.1 percent in the first quarter of 2022. The important financial measure was boosted by a record $890 million in revenues from regulatory credits related to emissions rules in the second quarter. If it weren't for those credits, Tesla's profit margin for its automotive sector would have dropped to 14.6 percent.

Musk has been putting most of his effort into creating a self-driving taxi service lately, choosing to work on this project instead of finishing the highly anticipated affordable electric vehicle, referred to as the Model 2, which will likely cost $25,000. Back in 2016, he first mentioned his vision for a system of self-driving cars that could be shared among Tesla owners to help cover the costs of owning their vehicles.

Musk has also shifted Tesla's attention towards creating Optimus, a self-driving humanoid robot. Recently, he mentioned that Optimus robots are already working on tasks in Tesla factories and that limited production will start next year. Musk also mentioned that Tesla plans to make these robots available for consumers in 2026.

"He emphasized that the main strength of Tesla is its autonomous capabilities. If you have faith that Tesla will successfully achieve autonomy, then you should consider investing in Tesla stock. Everything else is just background noise."

At the beginning of the month, Tesla announced that they had sold nearly 444,000 electric vehicles (EVs) from April to June. This was a decrease of 4.7 per cent compared to the previous year, but an improvement from the 387,000 sold in the first quarter. Despite the drop in sales, Tesla remains the top EV company, surpassing China's BYD.

In 2024, Tesla had a busy year, even for Musk. The wealthy business owner successfully won two crucial votes at the company's yearly gathering. Shareholders supported his massive $56 billion pay package, which had previously been rejected by a court in Delaware. They also approved a plan to move the company's headquarters to Texas.

After winning these battles, he promised to relocate his social media firm X and SpaceX to Texas from California as a result of an ongoing disagreement with California governor Gavin Newsom.

Musk has become one of the leading figures in Silicon Valley to support former president Donald Trump in the US election in November.

Musk showed support for Trump soon after surviving an assassination attempt on July 13th. He has also played a role in organizing a political action committee where tech investors and business leaders will contribute to Trump's campaign. Musk has refuted claims that he plans to donate $45 million per month from his own funds to Trump's campaign.

Trump has pledged to stop government funding for electric vehicles, which he has accused of hurting the US auto industry and denounced for being costly and manufactured in China.

Nevertheless, as he has increased communication with Musk recently, he seemed to change his opinion. During a rally in Michigan last weekend, Trump stated, "I frequently discuss electric vehicles but that doesn't mean I am against them. In fact, I am fully in favor of them."

In the last year, Tesla's stock has dropped by 8%, and its market value has nearly halved from its highest point of $1.2 trillion in November 2021.

More information was gathered by Nicholas Megaw.