Tesla starts 'first builds' of affordable model, posts steepest drop in quarterly revenue in over a decade
(REUTERS)Tesla started making the "first builds" of its affordable model in June, the electric vehicle maker said on Wednesday, adding that it expects volume production in the second half of this year.The affordable model is expected to help rekindle falling sales of its aging lineup as Tesla battles rising competition from cheaper EVs, especially in China, and a persistent backlash against CEO Elon Musk's far-right political views. Tesla did not provide an update on its full-year deliveries forecast on Wednesday after pulling its guidance in April, citing broader economic concerns amid tariffs on auto and auto part imports announced by President Donald Trump.The company reported the steepest decline in quarterly revenue in more than a decade, with a 12% fall, and profit missed Wall Street targets, with the adjusted profit per share of 40 cents lagging the consensus of 43 cents per share, according to data compiled by LSEG."Tesla's disappointing results aren't surprising given the rocky road it's traveled recently. But the company maintains a strong foundation in the key growth sectors of energy storage, robotics, and AI-powered transportation," said Emarketer analyst Jacob Bourne. "The question is whether leadership can execute on this integrated vision in this fast-moving market."Tesla shares were little changed in extended trading after closing the regular session at $332.56.Revenue fell to $22.5 billion for the April-June quarter from $25.50 billion a year earlier. Analysts on average were expecting revenue of $22.74 billion, according to data compiled by LSEG.The second straight quarterly revenue drop comes despite rolling out a much-awaited refreshed version of its best-selling Model Y SUV that investors had hoped would help revive demand. Also hurting revenue was a 51% drop in sales of automotive regulatory credits, which other automakers who have difficulty complying with government emissions rules buy from Tesla. The automotive gross margin, which excludes regulatory credits, was 14.96%, beating Wall Street targets. Tesla had said in April it would start producing the more affordable model by the end of the first half and sources had told Reuters the vehicle, a stripped-down version of its Model Y SUV, would be delayed by at least months. Tesla on Wednesday did not disclose any details on the model or how many units it had made. The company said it continued to expect volume production of its custom-built robotaxi - called the Cybercab - and Semi truck in 2026. Much of the company's trillion-dollar valuation hangs on its bet on its robotaxi service - a small trial of which was started in Austin, Texas, last month with about a dozen Model Y SUVs - and on its development of humanoid robots.Investors are concerned about whether Musk will be able to devote enough time and attention to Tesla after he locked horns with Trump by forming a new political party this month. He had promised weeks earlier that he would cut back on government work and focus on his companies.
A series of high-profile executive exits, including a longtime Musk confidant who oversaw sales and manufacturing in North America and Europe, is also adding to the concerns.
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