Tesla Stock Rises After Q2 Deliveries Beat Estimates

Tesla stock is trading higher in early US price action today after the electric vehicle (EV) giant reported its deliveries for the second quarter. While the company’s deliveries fell for the second straight quarter, the metric was nonetheless ahead of what analysts were expecting.

In Q2, Tesla produced 410,831 vehicles and delivered 443,956 vehicles. While the company’s deliveries fell 4.8% YoY, they were higher than the 439,000 that analysts expected. Notably, Tesla’s deliveries fell 8% in Q1 also while its revenues fell 9% which was the steepest pace of decline since 2012.

Tesla Reported a YoY Fall in Deliveries

In Q1, Tesla’s revenues came in at $21.30 billion which was well short of the $22.15 billion that analysts expected.

The Elon Musk-run company also missed bottomline estimates and its EPS of 45 cents fell short of the 51 cents that analysts were expecting.

In its shareholder deck, Tesla reiterated that the “volume growth rate may be notably lower than the growth rate achieved in 2023. In response to an analyst question on whether its sales growth could be negative in 2024, Musk responded by saying No, I think we’ll have higher sales this year than last year.”

Meanwhile, Tesla has held on to its title as the world’s largest seller of battery electric vehicles (BEVs) as its deliveries were slightly ahead of the 426,039 that BYD delivered. However, thanks to record sales of plug-in hybrid vehicles (PHEVs), BYD’s total shipments almost hit 1 million.

EV Demand Growth Has Slowed Down

Notably, Tesla previously boasted of being a supply-constrained company and could sell all the cars that it could produce amid the strong demand.

However, the industry dynamics have changed over the last few quarters. Firstly, the EV demand growth has slowed down as the early adopters have fizzled away and the EV industry is now struggling to increase the adoption beyond them.

Secondly, Tesla has ramped up its capacity which has increased its nameplate production capacity. To make things worse, there is heightened competition in the EV industry after a flurry of new launches.

EV Industry Price War

Tesla has started an EV price war and has lowered car prices multiple times. Due to the frequent price cuts, its operating margins – which were once the envy of the industry – are down to mid-single digits.

The price war is also taking a toll on the earnings of startup EV companies most of which are anyways posting losses. Even legacy automakers are witnessing widening losses in their EV business as they have had to cut prices to keep the models competitive.

Tesla Has Slashed Its Workforce Amid Slowdown

Amid slowing sales, Tesla has slashed its workforce. Regulatory filings showed that Tesla had 140,473 employees at the end of 2023. However, it now has just around 121,000 employees which includes both permanent and temporary workers. Notably, this might not be the precise number and is based on the “everybody” email distribution list as of June 17 which was reviewed by CNBC.

Tesla is Working On a Low-Cost Model

To boost its deliveries and expand its target market, Tesla is working on a low-cost model. During the Q1 earnings call, Tesla  provided an update on its low-cost model and said these “will be made on our current production lines much more efficiently.” Musk said that Tesla should launch the model early next year if not later this year.

The model would especially help Tesla in China where rival BYD has raced ahead with its budget models. Musk has praised Chinese EV companies several times in the past and they have given Tesla a tough competition.

Meanwhile, Musk has ruled out a Model Y refresh in 2024. The company sold 1.2 Model Y cars in 2024 and it was the best-selling model last year across electric cars as well as internal combustion engine (ICE) cars. It was the first time in history that an electric car was the best-selling model.

Tesla is Repositioning Itself as a Tech Company Rather Than an EV Company

Amid slowing sales of electric cars, Tesla has doubled down on tech products and is working on the Optimus humanoid and Dojo supercomputer. Musk is particularly bullish on Tesla’s Optimus humanoid and said, it “will be more valuable than everything else combined.” He added, “We do think we will have Optimus in limited production in the natural factory itself, doing useful tasks before the end of this year. And then I think we may be able to sell it externally by the end of next year.” Musk however termed these timelines as “guesses.”

Meanwhile, TSLA shares have rallied over the last two days and have narrowed their YTD losses to just around 8%. The stock was the worst-performing S&P 500 stock for quite some time this year but has since recovered, partially because of the optimism over its AI pivot.

Also, after shareholders approved Musk’s gigantic compensation package, markets now have one less aspect to worry about. However, Tesla’s market cap is still much below its November 2021 highs as markets have been wary of EV stocks amid slowing growth.