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Tesla’s Q1 net income down 55% year over year

Tesla’s first-quarter net income plummeted 55 per cent, but its stock price surged in after-hours trading Tuesday as the company said it would accelerate the production of new, more affordable vehicles.

The Austin-based company said it made $1.13 billion US from January through March compared with $2.51 billion US in the same period a year ago.

Investors and analysts were looking for some sign that Tesla will take steps to stem its stock’s slide this year and grow sales.

The company did that in a letter to investors Tuesday, saying that production of smaller, more affordable models will start ahead of previous guidance.

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The smaller models, which apparently include the Model 2 small car that is expected to cost around $25,000 US, will use new-generation vehicle underpinnings and some features of current models. The company said it would be built on the same manufacturing lines as current products.

On a conference call with analysts, CEO Elon Musk said he expects production to start in the second half of next year “if not late this year.”

New factories or massive new production lines won’t be needed for the new vehicles, he said.

But Musk gave few specifics on just what the new vehicles will be and whether they would be variants of current models. “I think we’ve said all we will on that front,” he told an analyst.

He did say that he expects Tesla to sell more vehicles this year than the 1.8 million sold last year.

The company also appears to be counting on a vehicle built to be a fully autonomous robotaxi as the catalyst for future earnings growth. Musk has said the robotaxi will be unveiled on Aug. 8.

Shares rise after closing

Shares of Tesla rose over 11 per cent in trading after Tuesday’s closing bell, but are down more than 40 per cent this year. The S&P 500 index is up about five per cent for the year.

Morningstar analyst Seth Goldstein said the company gave guidance about its future that was clearer than in the past, allaying investor concerns about production of the Model 2 and potential for growth. “I think for now we’re likely to see the stock stabilize,” he said.

“I think Tesla provided an outlook today that can make investors feel more assured that management is righting the ship.” But if sales fall again in the second quarter, the guidance will go out the window and concerns will return, he said.

Excluding one-time items such as stock-based compensation, Tesla made 45 cents per share, falling short of analyst estimates of 49 cents, according to FactSet.

The company’s gross profit margin — the percentage of revenue it gets to keep after direct expenses — fell once again to 17.4 per cent. A year ago it was 19.3 per cent, and it peaked at 29.1 per cent in the first quarter of 2022.

The company also repeated that vehicle sales growth “may be notably lower” this year than last as it works on the launch of its next generation vehicle.

Many analysts say the sales decline raises questions about demand for Teslas and other electric vehicles.

More vehicles made than sold

Last weekend, Tesla lopped $2,000 US off the price of the Models Y, S and X in the U.S. and reportedly made cuts in other countries including China.

In a note to investors Monday, Bank of America Global Research analyst John Murphy wrote that Tesla’s shares have been under pressure since the start of the year due to weaker EV sales, and production that exceeds demand.

From January through March, Tesla manufactured 433,371 vehicles and delivered 386,810, making over 46,000 more than it sold. That’s even after it cut prices last year on some of its more expensive models by up to $20,000 US.

Last week, Tesla announced it would lay off 10 per cent of its 140,000 employees. The company also said it would ask shareholders to restore a $56-billion US pay package for Musk that was rejected by a Delaware court.

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