(Reuters) โ Tesla shares slid 8% in U.S. pre-market trades on Wednesday after the electric vehicle makerโs profit margin fell to a five-year low, raising the urgency of making lower-priced vehicles to power sales rather than relying on price cuts.
Teslaโs price cuts and incentives to drum up sales in a toughly contested market led to automotive gross margins, excluding regulatory credits, of 14.6% for the second quarter, missing analystsโ estimates of 16.29%, per Visible Alpha.
โUntil Tesla is able to begin production of new lower-cost models, which the company expects in H1 2025, we believe pricing/incentives could remain a key demand lever and weigh on margins,โ said Goldman Sachs analysts in a note.
The companyโs stock price tumbled 7.9% to $226.40 in early U.S. pre-market trading, setting Tesla on track to lose about $63.7 billion in market value.
Teslaโs EV deliveries have fallen for two straight quarters as the lack of affordable new models turns buyers to rival EV makers.
These rivals, CEO Elon Musk said on a post-earnings call, โhave discounted their EVs very substantially, which has made it a bit more difficult for Tesla.โ
However, these โsequential fluctuations in automotive gross margin hardly warrant mentionโ given Teslaโs wider ambition of commercializing self-driving software and other A.I.-enabled products, said Alexander Potter, a senior research analyst at Piper Sandler.
Over the years, Musk has promoted Tesla as a technology company, with self-driving technology as the key. He said on Tuesday he would be shocked if there were no self-driving Tesla vehicles, without human supervision, next year.
If not the technology, some analysts were sceptical about the timeline.
โWe do worry about the companyโs ability to secure regulatory approvals and donโt see a 2025 timeline as realistic for a service offering,โ RBCโs Tom Narayan said.
Still, despite the disappointing quarterly 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.
The net result is that analysts, on average, still rate the stock a โholdโ though their median price target of $212.50 indicates they expect the price to fall 13% over the next few months, the data shows.
The stock had slipped 0.85% this year through Tuesdayโs close, compared to a 16% rise in the S&P 500 index.
(Reporting by Reshma Rockie George in Bengaluru and Alun John in London, editing by Amanda Cooper and Savio DโSouza)
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