Tesla shares rise 11%: aims to start production of new affordable EVs by early 2025

Stock prices skyrocketed due to overtime trading after Chief Executive Officer Elon Musk told investors there is a possibility that production of a new affordable EV model will begin sooner than expected.

Based on LSEG's survey of analysts, the comparison between what the company reported and Wall Street's predictions is as follows:

Earnings per share: 45 cents after adjustment, expected 51 cents

Earnings: $21.3 billion versus forecast $21.5 billion

Sales declined from 23.33 billion dollars in the same period last year and 25,170 million dollars in the fourth quarter. Net profit was 1.13 billion dollars (34 cents per share), a 55% decrease from 2.51 billion dollars (73 cents per share) in the same period last year.

The drop in sales was even larger than the company's previous drop in 2020 due to production interruptions due to the COVID-19 pandemic. Tesla's car sales fell 13% year over year to 17.38 billion dollars in the first three months of 2024.

Mr. Musk said in telephone talks that the company had previously anticipated that it would begin in the latter half of 2025, but stated that production of the new model “is planned to begin in the first half of 2025, if not the latter half of this year. Musk also touted Tesla's investment in artificial intelligence infrastructure. The company said it is discussing with “the first major automobile manufacturer” about licensing driver assistance systems sold in the US as fully automated driving (FSD) options.

In shareholder materials, Tesla repeated its pessimistic outlook for 2024 and told investors that “the sales volume growth rate may be significantly lower than the growth rate achieved in 2023.”

Before rising 11% overtime, Tesla shares fell more than 40% this year, and reached their low since 2023/1 due to sluggish car deliveries, competition in China, and concerns about the company's continued price cuts. At the beginning of this month, Tesla reported that the number of vehicle deliveries in the first quarter decreased by 8.5 percent compared to the same period last year.

The company stated in documents that it is accelerating sales of “new cars, including more affordable models,” which “can be produced on the same production line” as Tesla's current lineup. Tesla aims to “maximize” its current production capacity and achieve “growth of 50% or more compared to production in 2023” before investing in a new production line.

Also, on the deck, Tesla showed off a screen of a robo-taxic-based ride-hailing service. The company has promised self-driving cars for years, but Musk's promises have not been fulfilled.

Overall EV sales growth has slowed, and Tesla and major rivals are lowering EV prices to stimulate demand. There are also price cuts this year, and Tesla's first quarterGross profit fell sharply by 18%I did it.

After discussing operational issues in the first quarter, such as supply chain disruptions in the Red Sea, Mr. Musk stated “I think the second quarter will improve considerably” by conference call.

Tesla said total sales included revenue from early sales of FSD options. With the release of a feature called Autopark in North America, the company is now able to recognize deferred revenue.

Sienna Capital automotive analyst Chris Reddle estimates that Tesla recognized as much as 700 million dollars of deferred revenue from FSD in the same quarter. This equates to approximately 4.3% of Tesla's auto revenue after deducting regulatory credits.

Tesla began large-scale restructuring this month, and two executives, Drew Baglino and Rohan Patel, have resigned. Musk said in a company-wide memo last week that the company would cut more than 10% of its global workforce.

Capital investment increased 34% from the previous year to 2.77 billion dollars.

Free cash flow turned negative for the same quarter, and the company reported a deficit of 2.53 billion dollars. A year ago, Tesla reported free cash flow of $441 million, and this figure reached $2.06 billion in the fourth quarter. Tesla believes that this negative figure is due to an increase in inventory of 2.7 billion dollars and capital investment of 1 billion dollars in “AI infrastructure.”

Revenue from Tesla's energy division increased 7% from the same period last year to 1,640 million dollars, and service and other revenue increased 25% to 2,290 million dollars.

At the earnings conference, Mr. Musk was asked if he plans to quit Tesla considering that he is doing many jobs such as being the leader of SpaceX, managing X (formerly Twitter), and managing other businesses.

Musk didn't answer, but he said he spends the majority of his time at work, rarely even Sunday afternoons off, and that he will strive to make Tesla “very prosperous.”