Another difficult publication for Tesla. The Californian manufacturer experienced its sharpest quarterly sales decline in more than ten years and posted results below Wall Street expectations. In the wake of this, the stock lost 5% in after-hours trading on Wednesday.
Revenue fell 12% y-o-y to $22.5bn between April and June, below the consensus estimate compiled by LSEG. Adjusted EPS came in at 40 cents, also below expectations. A 51% drop in regulatory credit sales also weighed on results.
However, the profit margin on vehicle manufacturing was better than expected, thanks to a reduction in the unit cost per vehicle.
Tesla's global deliveries fell 13.5% in the second quarter. And the imminent $7,500 reduction in the tax credit for electric vehicle buyers announced by the US government is expected to weigh further on demand.
A perfect storm
Tesla remains tight-lipped about the more affordable model announced in April. Internal sources suggest a delay of several months, and during the conference, Musk simply joked: "It's just a Model Y," mocking the fact that he had "spilled the beans." Production is expected to ramp up in the next quarter, but the company has chosen not to revise its annual delivery targets, citing economic uncertainties and the launch schedule.
"Tesla's disappointing results are not surprising given the rocky road it has traveled recently," said Jacob Bourne of eMarketer. "A truly affordable model would be a major asset to boost sales, if Tesla can position it well without hurting its high-end models."
For now, Tesla's situation resembles a "perfect storm": an aging catalog, increased competition from Chinese brands, and a segment of the public turned off by Musk's highly conservative political views. The situation is further complicated by a series of departures from the company's senior ranks, including a key executive in charge of sales and production in the North American and European markets. As a result, the stock has lost nearly 30% since its mid-December high.
Confidence in the future
Nevertheless, Elon Musk remains confident about the group's future. During the conference call to present the results, he admitted that the company is preparing to go through "a few difficult quarters," but expressed confidence in the transition to large-scale autonomy by H2 2026.
"I'm not saying it will happen, but it's possible — you know, Q4, Q1, maybe Q2," Musk said, referring to the coming quarters. "But once we achieve autonomy in the second half of next year, I would be surprised if Tesla's economic situation wasn't very attractive."
Indeed, Tesla continues to bet everything on autonomous driving. The Cybercab, a robotaxi model, and the Semi electric truck are still expected in 2026. Tesla's market valuation is largely based on the success of this strategy. A small-scale test of robotaxis has already begun in Austin, Texas, with a dozen Model Ys, and the company plans a large-scale rollout by the end of the year to about half of the US population.
Musk emphasized that Tesla is currently awaiting regulatory approvals in several US states, as well as in the Netherlands for its supervised Full Self-Driving software. He expects the robotaxi business to begin contributing significantly to the bottom line by the end of 2026.
The future will tell whether Q2 2026 is a realistic target. As Elon Musk himself acknowledged last October during the presentation of the Cybercab: "I tend to be a bit optimistic about timelines".
