Tesla shares fell more than 8% Thursday after the electric vehicle maker reported weaker-than-expected second-quarter results and CEO Elon Musk warned of potentially "a few rough quarters" ahead. The company's earnings miss comes as Tesla grapples with declining vehicle sales, the expiration of U.S. federal EV tax credits, and broader market competition.
Tesla posted second-quarter revenue of $22.50 billion, falling short of the $22.64 billion consensus estimate compiled by Bloomberg and down 12% from $25.05 billion a year earlier. Adjusted earnings per share came in at $0.40, missing the $0.42 estimate. Operating income was $923 million, well below the $1.23 billion forecast.
Automotive revenue fell 16% year-over-year to $16.7 billion, and Tesla delivered just 384,122 vehicles globally during the quarter - a 13.5% decline compared to the same period in 2023. Registration data from the European Automobile Manufacturers Association showed falling new car sales in Europe, further underscoring Tesla's regional weakness.
CFO Vaibhav Taneja cited the impact of the recently enacted One Big Beautiful Bill Act (OBBB), which terminates the $7,500 federal EV tax credit at the end of the third quarter. "Given the abrupt change, we have limited supply of vehicles in the US this quarter," Taneja said. "We may not be able to guarantee delivery orders placed in the later part of August and beyond."
Musk echoed concerns about the tax credit's expiration, stating, Tesla "probably could have a few rough quarters... I am not saying that we will, but we could." He added that Tesla would only ramp up production of its new affordable model - which began initial builds in June - once the credit expires. Volume production is slated for the second half of 2025.
Tesla's sales of regulatory credits, a key revenue stream, fell to $439 million from $890 million a year earlier, a drop the company attributes to the OBBB's regulatory changes.
Despite near-term pressures, Tesla is continuing to develop longer-term bets like its robotaxi fleet. The company said robotaxi testing has expanded in Austin, Texas, with additional test zones expected in U.S. cities. Musk said he anticipates half of the U.S. population will be covered by the service by the end of 2026.
Investor sentiment has also been clouded by Musk's political activity, including his role in President Trump's Department of Government Efficiency and his endorsement of Germany's AfD party. Some shareholders have expressed concern that Musk's political involvement is damaging the brand.
Tesla has not issued guidance for the remainder of 2024. "Management initially guided for deliveries growth in 2025. We interpret no guidance as a signal that management is no longer forecasting volume growth," said Morningstar senior equity analyst Seth Goldstein.
Still, some analysts remain bullish. "The list of potentially game-changing level catalysts spanning AV, EV, and robotics tilt the risk/reward favorably," said TD Cowen analyst Itay Michaeli, maintaining a Buy rating and a $374 price target.
