Tesla on Tuesday reported a significant drop in profit in the three-month period between April and June, a result of the electric car company’s sluggish sales.

Profit Begins to Fall

The automaker said it earned $1.5 billion in the second quarter of the year on revenue of $25.5 billion. In the second quarter of 2023, Tesla made $2.7 billion and had revenue of $24.9 billion.

The company’s current operating profit margin, a measure of how much money it makes on every dollar of revenue, was 6.3%, compared with 9.6% in the same period a year ago.

The results will most likely heighten pressure on Tesla and its CEO, Elon Musk, to show that the company can find new ways to grow and make money.

Tesla shares have jumped 40% since the end of May in large part because investors are betting that Musk will successfully remake Tesla into an artificial intelligence company that operates a driverless taxi service and sells robots that can efficiently perform manufacturing and other tasks.

Related Story: Tesla CEO Elon Musk Appears to Confirm Delay in Aug. 8 Robotaxi Unveil Event to ...

“While we continue to execute innovations to reduce the cost of manufacturing and operations, over time, we expect our hardware-related profits to be accompanied by an acceleration of AI, software and fleet-based profit,” Tesla said in a statement.

The company’s bottom line was helped by a surge in sales of regulatory credits to other automakers that need them in order to meet emissions standards. Tesla took in $890 million from selling such credits in the second quarter, up from $282 million a year earlier.

Sales of Batteries Doubled

Another area of growth for the company has been sales of batteries that are primarily used by energy companies to store and discharge power on electricity grids. Sales of those systems doubled in the quarter, to $3 billion, from a year earlier.

Even taking those gains into account, the company’s second quarter profit was lower than what Wall Street analysts had expected, and Tesla’s stock fell about 3% in extended trading Tuesday after its earnings report.

Related Story: Tesla’s Share of U.S. Electric Car Market Falls Below 50%

It is unclear whether the company’s new taxi and robot businesses will come up to speed fast enough to make up for Tesla’s weakening car sales. Several companies, including Google’s parent Alphabet, have been developing driverless taxis for many years but are only offering rides in a few cities.

Sales of Tesla’s electric cars fell 4.8% in the second quarter, to 444,000 vehicles from the same period a year earlier. Production in the period declined 14%, to about 411,000 cars.

The second quarter’s setback comes after Tesla reported a 55% drop in profit and 9% decline in revenue in the first three months of 2024.

Increased Competition From Other Manufacturers

The company is facing increasing competition from other manufacturers, which have ramped up production of electric models. Tesla’s share of electric vehicle sales in the United States fell in the second quarter to below 50% for the first time, according to Cox Automotive, a research firm.

From April through June, Tesla accounted for 49.7% of electric vehicle sales in the United States, down from 59.3% a year earlier, Cox said. Ford Motor Co. said this month that it sold nearly 24,000 EVs in the second quarter, far fewer than Tesla but a 61% increase from a year ago. General Motors’ sales of battery-powered models rose 40%, to nearly 22,000 vehicles.

Separately, GM said Tuesday that it made $2.9 billion in the second quarter, a 14% increase from a year ago. Its operating profit margin, at 9.3%, outpaced Tesla’s, a rare accomplishment for GM.

Related Story: The Cybertruck: A Culture War on Wheels

Tesla’s slump in sales appears to be at least partly the result of the right-wing politics of Musk. Tesla’s early customers and fans included many environmentalists and left-leaning consumers, many of them residents of California. Registrations of new Teslas in the state fell 24% in the second quarter, according to data published last week by the California New Car Dealers Association.

With its sales slumping, Tesla has been trying to slash costs. In April, Musk said the company would lay off more than 10% of its staff, or about 14,000 people, worldwide. The cuts include 2,000 workers at its plant in Fremont, California, and nearly 2,700 at another in Austin, Texas.

It has also cut the prices of its cars, which has reduced the profit it makes on each vehicle it sells. For a time, those cuts helped to lift sales, but now the company is struggling to win over customers even with lower prices.

–

This article originally appeared in The New York Times.

By Neal E. Boudette/Katrin Streicher
c.2024 The New York Times Company