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Tesla's price cuts and incentives to drum up sales in a toughly
contested market led to automotive gross margins, excluding
regulatory credits, of 14.6% for the second quarter, missing
analysts' estimates of 16.29%, per Visible Alpha.
"Until Tesla is able to begin production of new lower-cost
models, which the company expects in H1 2025, we believe
pricing/incentives could remain a key demand lever and weigh on
margins," said Goldman Sachs analysts in a note.
The company's stock price tumbled 7.9% to $226.40 in early U.S.
pre-market trading, setting Tesla on track to lose about $63.7
billion in market value.
Tesla's EV deliveries have fallen for two straight quarters as
the lack of affordable new models turns buyers to rival EV
makers.
These rivals, CEO Elon Musk said on a post-earnings call, "have
discounted their EVs very substantially, which has made it a bit
more difficult for Tesla."
However, these "sequential fluctuations in automotive gross
margin hardly warrant mention" given Tesla's wider ambition of
commercializing self-driving software and other A.I.-enabled
products, said Alexander Potter, a senior research analyst at
Piper Sandler.
Over the years, Musk has promoted Tesla as a technology company,
with self-driving technology as the key. He said on Tuesday he
would be shocked if there were no self-driving Tesla vehicles,
without human supervision, next year.
If not the technology, some analysts were sceptical about the
timeline.
"We do worry about the company's ability to secure regulatory
approvals and don't see a 2025 timeline as realistic for a
service offering," RBC's Tom Narayan said.
Still, despite the disappointing quarterly results, only one of
the 50 analysts covering the stock cut their rating, while there
were three price target increases and two decreases, per LSEG
data.
The net result is that analysts, on average, still rate the
stock a "hold" though their median price target of $212.50
indicates they expect the price to fall 13% over the next few
months, the data shows.
The stock had slipped 0.85% this year through Tuesday's close,
compared to a 16% rise in the S&P 500 index.
(Reporting by Reshma Rockie George in Bengaluru and Alun John in
London, editing by Amanda Cooper and Savio D'Souza)
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