Tesla is set to report its quarterly results this Tuesday amid growing uncertainty. Investors await clarity on two key issues: the launch of an affordable electric vehicle and the progress of its robotaxi programme.
According to Reuters, the budget model — initially promised for the first half of the year — is expected to be a stripped-down version of the Model Y SUV, built in the United States. However, its production has reportedly been delayed by several months.
“The low-cost Tesla might be the one thing that could turn momentum around. But if it ends up just being a bare-bones Model Y, the market could be disappointed,” said Will Rhind, CEO of GraniteShares.
Tesla is contending with a decline in both sales and automotive gross margins. Analysts estimate the company’s profitability in this segment may have reached its lowest level in the first quarter. This trend may continue as Tesla maintains incentive offers to stimulate demand.
To lower capital costs, the company plans to develop the new vehicle using existing platforms and production lines, although few additional details have been disclosed.
In response to waning demand for its ageing vehicle line-up and intensified competition from Chinese manufacturers in Europe and China, Elon Musk shifted focus in 2023 towards artificial intelligence and robotaxis.
He pledged to roll out a driverless ride-hailing service in Texas by mid-2024, followed by California later in the year.
However, doubts persist over the safety of autonomous driving and the potential legal risks associated with deploying unproven technology on public roads. Tesla is currently pursuing the necessary regulatory approvals to operate the robotaxi service.
In addition, Reuters reported that the production of the Cybercab — a conceptual vehicle central to the robotaxi strategy — could face setbacks due to Tesla’s suspension of component imports from China. The move follows a tariff hike to 145% introduced by former President Donald Trump.
Compounding these challenges are concerns over Musk’s time allocation, given his involvement in the Trump administration. His actions have triggered protests and vandalism at Tesla showrooms, contributing to a decline in brand perception and an increase in vehicle trade-ins.
Sales have dropped sharply, particularly in California, Tesla’s largest U.S. market. The company’s shares have fallen 40% year-to-date, erasing over $500 billion in market value.
Despite lower deliveries, analysts expect Tesla’s first-quarter revenue to remain flat at $21.35 billion, driven by higher sales of regulatory credits and solar energy and storage systems.
Tesla’s automotive gross margin, excluding regulatory credits, is forecasted at 11.83%, down from 13.6% in the previous quarter, based on estimates from 21 analysts surveyed by Visible Alpha.
According to Edison Yu, analyst at Deutsche Bank, the company is likely to prioritise delivery volumes over margins, which may involve further incentives such as free charging or autonomous features, potentially affecting profitability.
Meanwhile, Tesla has begun offering significant discounts on Cybertruck units, as order volumes have declined. In March, the company issued a recall of all Cybertrucks sold to address a fault with an external panel, raising fresh concerns over the vehicle’s safety standards.
