Tesla car sales slump again, but Musk starts three new programs

Early this morning, Tesla released its earnings report for the second quarter of 2024, and the numbers were mixed.

After seeing an 8.7% decline in revenue in the first quarter, Tesla reversed course and returned to growth this quarter. Revenue reached $25.5 billion in the second quarter, up 2.3% year-over-year, with a decline in the automotive business but growth in energy production and storage, and services (after-sales maintenance, insurance, etc.).

 In terms of profit, Tesla’s operating profit for the quarter was $1.6 billion, down 33 percent year-on-year, due to factors such as price cuts to boost sales and investment in R&D for AI.

In terms of business breakdown, Tesla’s core automotive business generated revenue of $19.9 billion in the quarter, of which $890 million was generated from carbon credits, more than tripling year-on-year, and after deducting $460 million from car leasing, the actual revenue from car sales was only $18.5 billion, a year-on-year decline of 9.3 percent.

In the second quarter, Tesla’s global sales were 444,000 vehicles, a year-on-year decrease of 22,000 vehicles, down 4.8%, once again continuing the year-on-year decline of the first quarter, but the good thing is that the sequential growth of 14.8%, sales stopped the decline.

As evidenced by the fact that revenue fell faster than sales, Tesla made a price cut promotion in the second quarter. And the ringgit growth in sales shows that the price cuts still have some effect.

Take the Chinese market as an example, at the end of April, after the Xiaomi SU7 was launched, Tesla cut the price of all models by about 14,000 yuan, and the starting price of Model 3 dropped to 231,900 yuan, close to the starting price of Xiaomi SU7.

In addition, Tesla’s Model 3 and Model Y models have also launched limited-time 0% down payment or 0% interest purchase programs.

01

Price cuts and promotions have continued the decline of Tesla’s gross profit margin on auto sales, falling to 14.6%, which is close to the waist compared with the peak.

In the short term, Tesla’s sales for the whole of this year are likely to decline: Tesla’s global sales in 2023 will be about 1.8 million units, with sales of only 831,000 units in the first half of this year, and it will need to achieve an average of 484,500 units per quarter in the second half of the year to be on a par with 2023. Under the current competitive market environment, it will not be easy to reach this level in the next two quarters.

Moreover, according to the current information, starting from July, Europe will impose tariffs on Chinese electric vehicles, and Model 3 exported from Tesla Shanghai factory to Europe will be subject to a tariff of nearly 20.8%, so the sales of Tesla in Europe in the second half of the year is not optimistic.

As for other models, the current earnings report does not disclose the capacity climb of the Cybertruck (released in November 2019 ), but only says that the Cybertruck is not expected to be profitable until the end of the year, and the electric truck Semi (released in November 2017) will not be put into production until the end of 2025.

As for the lower-priced models, Tesla’s current statement is that they will be released in 2025, but actual mass production will have to wait until who knows what year.

02

The car-building story has gone flat in the short term, so Tesla is starting to tell more new stories.

In the second quarter, Tesla’s energy generation and storage business revenue reached $3.01 billion, doubling year-on-year, and the proportion of total revenue exceeded 10%, reaching 12% this quarter. And, thanks to lower prices for raw materials such as lithium carbonate, gross margins in the energy business are as high as 25%.

Energy storage battery installations reached 9.4 GWh in the quarter, up 129% sequentially from 4 GWh in the first quarter and up 157% year-over-year.

Tesla’s cumulative installation of energy storage batteries in the first half of the year has reached 13.5 GWh, close to Tesla’s full-year deployment of 14.724 GWh last year.

And on July 18, Intersect Power, a U.S. clean energy company, announced that it had signed a new order with Tesla for 15.3 GWh of Megapacks energy storage batteries, with the first batch of Megapack batteries scheduled for delivery in 2025 and 2026.

In the third chapter of Tesla’s ambitious plan released last year, Tesla said that in order to achieve 100% energy sustainability on the planet by 2050, it would need to triple installed wind and solar power, increase power and storage battery production by 29 times, and increase electric vehicle production by 11 times by 2030 (compared to 2022).

In time, the energy storage business will be another strong driver in addition to the car manufacturing business.

03

And outside of the energy storage business, Tesla’s other two programs are Autopilot and Robotics.

Autopilot includes FSD and Robotaxi.

Musk said at the current earnings meeting that the Autopilot software, FSD version V12.5 or V12.6, will be coming to China, Europe, and other countries, and is expected to be approved by the end of this year after an early push and submission to regulatory review.

Currently, FSD subscriptions in North America are priced at $99 per month, incurring an annual contribution subscription cost of $1,000, assuming two months of non-use in a year.

If 1 million of Tesla’s 6 million cars sold worldwide pay for FSD software, it will generate $1 billion in annual revenue, and the high-margin software business will contribute more to profits than the car manufacturing business. By then, Tesla’s car business model will be like razor blades and razor frames, with razor frames sold cheaply and money made by selling blades.

In addition to user paid subscription revenue, Tesla can also license FSD to the rest of the car brands, as well as for driverless cab business, etc., to open up more market space.

Of course, all of this is still in the PPT stage.

Cars are sold cheaply, which has been done nowadays, mainly because of the fierce market competition. And rely on software to earn big money, can be realized, not necessarily, especially in China. FSD national version of the current price is 64,000 yuan (may be adjusted after the official entry into China), and most of the national brands of electric vehicles Smart Driving function, there is no separate charge.

Earlier this month, Musk also apologized for the delay in the release of FSD V12.4.2 because “ Tesla trained too much on extreme situations and not enough on regular scenarios, resulting in a less than smooth experience on autopilot, which is like a doctor focusing on patients in the emergency room at the expense of preventative medicine. ”

The release of the Robotaxi product, originally scheduled for August 8, has also been pushed back to October 10, but how much time it will take for Robotaxi to go from release to eventual commercialization is anyone’s guess.

Of course, Tesla’s other potential growth area is the robot Optimus.

Musk said on the call, it is expected that early next year, the robot Optimus will open trial production, the initial several thousand robots will be in the Tesla factory to undertake certain mass production tasks, and subsequently with the increase in productivity, newer versions of Optimus robots will be open to external customers sales channels.

04

Musk had boldly predicted at the 2024 shareholders’ meeting that the ratio of humanoid robots to human beings in the future would exceed 1:1, and even reach the amazing ratio of 2:1, which represented that the global humanoid robot market would have a huge capacity of 10 billion to 20 billion units, and the annual output would be as high as 1 billion units.

If Tesla can occupy 10% of the market share, its annual production will reach 100 million Optimus, the cost of a single robot is expected to be controlled at about $10,000, with a $20,000 price tag, it can bring $1 trillion gross profit space every year.

Let’s not talk about whether the future demand for humanoid robots will be that much, but it’s hard to say whether the spending power is that big. According to the World Bank statistics, the global GDP per capita in 2022 will only be 12,743 U.S. dollars, in order to have a 20,000 U.S. dollars robot, the economy may have to continue to develop for a few more decades.

Overall, Tesla’s technology is really in the first echelon, but whether it can be successfully realized commercially, there is a great deal of uncertainty.