Tesla’s earnings week highlights price cuts, Elon’s ‘balls to the wall’ freedom push

Like Tesla As it prepares to report potentially unimpressive first-quarter financial results on Tuesday, the company is taking another step toward “hitting the wall with freedom,” as CEO Elon Musk put it last week. post on X.

Over the weekend, Tesla dropped the price of its advanced Full Self-Driving (FSD) driver assistance system to $8,000, down from $12,000. The price cut includes last week’s drop in FSD’s monthly subscription to $99, down from $199. The push to get FSD in more cars could be an effort to collect more data as Tesla works to strengthen the neural networks that will enable more complete autonomy. FSD today can do most of the driving in cities and on highways, but it still requires a human to be alert with their hands on the wheel if the system needs to take over.

Tesla faces reduced profits as it makes a big and expensive bet on autonomous driving technology. Last week, Tesla cut 10% of its workforce in a cost-cutting move in preparation for the company’s “next phase of growth,” according to an email Musk sent to all employees.

Earlier this month, Musk suddenly announced on X that Tesla was suspending production of its $25,000 electric car in favor of the robotaxi he promised to unveil in August. Sources inside Tesla have confirmed to TechCrunch that they had no prior warning from Musk about this sudden change and that the internal restructuring reflects a new ethos that puts robotics development front and center.

All of this comes as Tesla zigzags on its EV pricing strategy.

Last week, Tesla removed the EV inventory price discount, but over the weekend it slashed prices on the Model 3 and Model Y by up to $2,000 in the US, China and Germany. As we saw in the first quarter of 2023, that price cut is affecting Tesla’s revenue and margins.

Tesla is scheduled to report earnings after the market closes on April 23. Musk has previously said that without autonomy, Tesla is “basically worth zero.”

The company will need to convince investors tomorrow that its shift in priority to self-driving cars is a silver lining in the cloud of marginal decline, rather than just smoke and mirrors.

Since Musk laid off workers and announced that Tesla will work hard on autonomy, Tesla’s stock price has dropped nearly 10%. Shares are down more than 42% since the start of the year.

What to expect in Tesla Q1 2024 earnings

Tesla’s lower first-quarter delivery figures as well as price cuts are ingredients in a smaller profit pie. And analysts seem to agree.

Analysts polled by Yahoo Finance expect earnings of $0.48 per share on revenue of $20.94 billion. As a reminder, Tesla generated revenue of $25.17 billion in Q4 and $23.3 billion in the first quarter of 2023.

Tesla delivered 386,810 vehicles in the first quarter of 2024, down 20% from the 484,507 it delivered in the last quarter of 2023. It is important to note that this was not a quarter-over-quarter blip. Tesla delivered fewer cars than in the first quarter of 2023 – the lowest year-over-year sales decline in three years.

Tesla’s Q4 results show the company is already facing declining profit margins due to its price-cutting strategy, rising costs for its Cybertruck production launch and other R&D costs.

The automaker reported net income, on a GAAP basis, of $7.9 billion in the fourth quarter — a large number driven by a one-time, non-cash gain of $5.9 billion. The company’s operating income and its earnings on an adjusted basis provided a clear picture of its financial performance.

Tesla reported operating income of $2.06 billion in the fourth quarter, a 47% decrease from the same period last year. On an adjusted basis, the company earned $3.9 billion, a 27% drop from the same period last year.

The question is whether Tesla can keep that profit pie from dropping into a profit muffin.

Since Tesla reported its Q1 2024 production and delivery numbers, the company has continued to pull various financial indicators aimed at attracting new buyers and persuading existing customers to pay for FSD — all while reducing costs and maintaining profit margins.

Those competing goals combined with Musk’s “wartime” status are bound to make the Q1 earnings call entertaining. Beyond that potential venue, there are lingering questions about how Tesla delivers on autonomy and whether it will be enough to convince investors that it can still lead and innovate.