Tesla Inc. TSLA-Q shares sank 11 per cent on Wednesday, evaporating almost US$90-billion in stock market value after chief executive officer Elon Musk’s talk of humanoid robots and driverless taxis failed to comfort investors worried about the electric-vehicle maker’s shrinking profit margins.
Tesla posted its lowest quarterly profit margin in five years late on Tuesday, with earnings per share missing estimates for the fourth consecutive quarter.
The sell-off left Tesla’s market capitalization at US$700-billion, down from more than US$1-trillion in 2021. Still the world’s most valuable carmaker, Tesla’s valuation relies on investor expectations of big future profits driven by yet-to-launch products such as its promised robotaxis and robots.
“All of Musk’s enthusiasm on the call, outside of [energy] storage, was for products that don’t exist,” said TD Cowen’s Jeff Osborne.
Tesla’s weak results, along with a report from Alphabet Inc. in which it flagged higher capital expenses, amounted to a poor start to second-quarter reports for Wall Street’s most valuable companies. Google parent Alphabet’s stock fell almost 5 per cent.
Tesla’s EV deliveries have fallen for two straight quarters, and it has not introduced a lower-cost model that many expected, causing buyers to turn to rival EV makers. China’s BYD, for instance, widened its sales lead over Tesla in Singapore in the first half of 2024.
Tesla has been forced to cut prices and boost incentives to drum up sales of its aging vehicle lineup. Mr. Musk said rivals “have discounted their EVs very substantially, which has made it a bit more difficult for Tesla.”
The company said the cheaper models it expects to bring out in the first half of 2025 would result in less cost reduction than previously expected, while delaying a widely awaited event for its robotaxi to October.
“Tesla is not being priced on auto, but autonomy and AI. … We believe any payoff from [Tesla’s AI] initiatives [is] further out,” UBS analyst Joseph Spak wrote, reiterating a “sell” rating on the stock.
AI investment
Tesla’s stock has recently traded at 85 times its 12-month forward earnings estimates, compared with seven for legacy automaker Ford Motor Co.
Mr. Musk said on Tuesday that Tesla’s Optimus humanoid robot had begun performing tasks autonomously in one of its facilities and that he would be shocked if there were no self-driving Tesla vehicles without human supervision next year.
In 2019, Mr. Musk told investors that Tesla would be operating a network of robotaxis by 2020.
He also launched a poll asking users on X if Tesla should invest US$5-billion in his AI startup xAI – a quarter of which he plans to keep for investors in X. The value of X, formerly Twitter, has plunged since his US$44-billion purchase of the platform.
Some Wall Street analysts questioned whether the 2025 timeline for the robotaxi, which is now expected to launch on Oct. 10, was realistic.
Tesla’s self-driving technology is a long way from being fully autonomous and it might take the company until the end of the decade, if at all, to reach a point where its cars can drive themselves without any human intervention, TD’s Mr. Osborne said.
The company’s price cuts and incentives pushed automotive gross margins, excluding regulatory credits, down to 14.6 per cent in the second quarter.
Despite the disappointing results, only one of the 50 analysts covering the stock cut their rating, while there were three price-target increases and two decreases, per LSEG data.
Analysts, on average, rate the stock a “hold,” with a median price target of US$212.50, the data show.