Tesla reported a substantial decrease in its second-quarter net income, which fell by 45% year-over-year to $1.48 billion, compared to $2.70 billion in the same period last year. This marks the company's second consecutive quarter of declining net income and its third consecutive quarter of overall profit decline. Adjusted earnings per share were $0.52, falling short of Wall Street's consensus of $0.62. Revenue, however, saw a modest increase of 2% to $25.5 billion, surpassing analyst estimates of $24.54 billion.
The automotive gross margin, excluding regulatory credits, was 14.6%, lower than the estimated 16.29% and significantly down from its peak of 29.1% in the first quarter of 2022. This erosion in profitability is largely attributed to the company's strategy of deep price cuts and incentives, such as low-interest loans, aimed at stimulating sales amidst a more competitive EV market. CEO Elon Musk acknowledged that aggressive discounting by competitors has made the market more challenging for Tesla.
Sales volume also saw a decline, with 443,956 vehicles sold from April through June, down 4.8% from 466,140 units sold a year prior. Analyst Dan Coatsworth of AJ Bell noted that Tesla has now missed earnings targets for four consecutive quarters, highlighting a disconnect between exciting long-term narratives like robotaxis and the company's current financial performance. The company's newest model, the Cybertruck, also underperformed, with only 4,300 units sold in the second quarter, representing a 50% decline from the previous year.
Tesla's profit margins are now at their lowest in five years, reflecting not only the price reductions but also increased competition from other automakers, including Chinese manufacturer BYD, which are rolling out more affordable and new EV models. These factors have led to a slowdown in Tesla's sales momentum, raising concerns about the company's ability to maintain its growth trajectory without more appealing new models.
