Tesla's profits fall again as Musk hopes robotaxis will offset declining sales
The fallout from Elon Musk's plunge into politics a year ago is still hammering his Tesla business as both sales and profits dropped sharply again in the latest quarter.
The car company that has faced boycotts for months said Wednesday that revenue dropped 12 per cent and profits slumped 16 per cent in the three months through June as buyers continued to stay away.
"The perception of Elon Musk, its chief executive, has rubbed the sheen right out of what once was a darling and soaring automotive brand," wrote Forrester analyst Dipanjan Chatterjee in an email. Tesla is "a toxic brand that is inseparable from its leader."
Quarterly profits at the electric vehicle, battery and robotics company fell to $1.17 billion, or 33 cents a share, from $1.4 billion, or 40 cents a share. That was the third quarter in a row that profit dropped. On an adjusted basis, the company said it earned 40 cents a share, matching Wall Street estimates.
Revenue also fell from $25.5 billion to $22.5 billion in the April through June period, slightly above Wall Street's forecast.
Tesla shares were down six per cent in premarket trading on Thursday.
With no affordable vehicles on the horizon until the last three months of the year and the upcoming elimination of a $7,500 US tax break for EV buyers, Musk acknowledged on Wednesday's earning call that the company could have "a few rough quarters."
Musk spent the earnings call talking less about car sales and more about robotaxis, automated driving software and robotics, which he says is the future of the company. But those businesses have yet to take off, and the gap between promise and profit was apparent in the second quarter.
The CEO said Tesla is "getting the regulatory permission" to launch robotaxis in several states, including California, Nevada, Arizona and Florida. He expects operations to reach "half the population of the U.S. by the end of the year" and to roll out at scale by the end of next year.
So far, though, the company is operating only a small fleet in Austin, Texas, that is not available to the general public. And getting regulatory approvals, particularly in California, is likely to prove a bigger hurdle than Musk described on the call.
"Tesla cannot afford a misstep with the robotaxi service," said Camelthorn Investments adviser Shawn Campbell, who owns Tesla shares. He added that "the wheels are coming off" its automotive business, with sales declines across "almost every market."
Regulatory roadblocks for robotaxisThe fall in core auto sales has led to more investor scrutiny of Musk's big robotaxi promises. Products such as the Cybertruck have come later than anticipated, and Musk has promised every year since 2016 that driverless Teslas would arrive no later than the following year.
Many questions on Wednesday's call focused on how quickly Tesla would be able to expand robotaxi services and the regulatory hurdles that remain.
Musk said he expected the robotaxi business would have a "material impact" on Tesla's business by the end of next year.
In April, he said it would become material "around the middle of next year," and predicted "millions of Teslas operating autonomously" by the second half of 2026.
The San Francisco Bay Area was first on Musk's list of expansion markets, but California regulators told Reuters on Wednesday that Tesla had not yet applied for permits needed to pick up and charge passengers for rides in fully autonomous vehicles.
Companies need a series of permits from both the California Department of Motor Vehicles (DMV) and the California Public Utilities Commission (CPUC) in order to test and deploy autonomous vehicles in the state.
To date, Tesla only has obtained the first in a series of permits needed to launch a service, and spokespeople for both agencies said the company has not applied for the additional permits needed to test and operate autonomous vehicles.
Tesla did not respond immediately to a request for comment. It disclosed in a filing on Thursday that regulators have asked for information on its robotaxi plans.
California has no specific time period to grant such permits, but Alphabet's Waymo, which offers autonomous ride-hailing in Los Angeles and the Bay Area, logged more than 13 million testing miles (20.9 million kilometres) and secured seven different regulatory approvals over nine years before receiving approval to charge passengers for rides in driverless robotaxis in 2023.
Tesla has logged just 562 testing miles (904 kilometres) in California since 2016, and has not reported any autonomous-driving miles to the state in six years, according to the most recent state records.
Paul Miller, principal analyst at market research and consultancy firm Forrester, pointed to Musk's comment about addressing half of the U.S. population "subject to regulatory approvals."
"That caveat is an important one, as regulatory approvals take time," he said.
Other markets Musk mentioned could move faster. In Arizona, a state Department of Transportation spokesperson said Tesla contacted state officials last month and had applied for permits to test and operate autonomous vehicles with and without a safety driver. The agency said a decision is expected at the end of the month.
Some investors are also seeking more specifics about the Austin launch.
Gene Munster, managing partner at Deepwater Asset Management, a Tesla investor, said he was disappointed the EV maker gave no updates on its earnings call on when the Austin service, which is currently available only to a select group of people who've been invited to use it, would be available to the general public or how many vehicles would be on the road.
"It seemed like he wanted to kind of steer clear of really putting hard estimates out there for how things play out," Munster said.
Protests, lack of a cheaper car also hurdlesA big challenge is that potential buyers not just in the U.S. but Europe and elsewhere are still balking at buying Teslas. Musk alienated many in the market for cars in Britain, France, Germany and elsewhere by embracing far-right politicians there.
Protest have popped up at Tesla showrooms and on the streets of big cities around the world, including in Canada, following Musk's foray into U.S. politics.
Rival electric vehicle makers such as China's BYD and German's Volkswagen have pounced on the weakness, stealing market share.
One way for Tesla to boost sales while waiting for that future: A cheaper model. The company is planning to introduce that to the market in the last three months of the year. Tesla had previously said that was going to happen by June.
Musk also said he expected regulatory approval to introduce its so-called full self-driving software in some parts of Europe by the end of the year. Musk had previously expected that to happen by March of this year. The feature, which is available in the U.S., is a misnomer because it is only a driver-assistance feature.
cbc.ca
