Tesla is expected to post a lower profit margin amid doubts about its growth and product strategy

Tesla is expected to report its lowest gross profit in more than six years on Tuesday, following a tumultuous week marked by car price cuts, car price cuts and pressure calls from investors to clarify product strategy.

Tesla boss Elon Musk will face open questions from investors during a conference call following the publication of the results of the fate of the “Model 2”, the low-cost car that he promised in January would be available in 2025.

On April 5, Reuters exclusively reported that Tesla had abandoned plans for this model and was considering building a self-driving robo-axis on a small car platform. Mr Musk first posted on social media that “Reuters is lying”, but has yet to point out any flaws or clarify the fate of the model. Investors had pinned their hopes for increased sales on the Model 2.

Graham Tanaka, a portfolio manager at the Tanaka Growth Fund, which was the first to buy Tesla shares, said he liquidated his remaining position in recent days due to uncertainty about the Model 2 and slow production of the Cybertruck electric car.

“The Model 2 was supposed to be the moat around their business model, but it was delayed a bit,” he said. “We think there will be more risk in owning Tesla next year because we don’t know how fast the Cybertruck will scale. The billionaire CEO was scheduled to meet with India’s Prime Minister Narendra Modi on Monday and announce a major investment in the car factory that was to produce a small model, of cheap, Mr. Musk pulled out at the last minute, citing “very heavy responsibilities for Tesla”.

Currently, Tesla’s sales growth is slowing, which should weigh heavily on Tuesday’s results. Earlier this month, the automaker reported an 8.5% drop in shipments and an increase in inventory. Over the weekend, Tesla announced the latest in a series of global price cuts on its Model 3, Model Y and others, further reducing its margins.

Several analysts expect Tesla’s annual emissions to decline for the first time in 2024, after years of double-digit growth. Tesla warned in January that delivery growth would be “particularly weak” this year, indicating that price cuts would not be enough to revive demand.

Tesla stock has lost nearly 43% since the start of the year as of Monday afternoon.

Wall Street expects gross auto loans excluding regulatory loans to be 15.2%, according to 20 analysts polled by Visible Alpha, down from 19% a year earlier and the lowest since the fourth quarter of 2017.

The automaker may also face questions about its struggle to mass-produce its new 4680 batteries, which Tesla needs for the Cybertruck and which it hoped to deploy in other models to cut costs.

Tesla battery chief Andrew Baglino resigned last week as the company began layoffs expected to include more than 10% of its global workforce.

THE FUTURE OF ROBOTAXIS?

Tesla remains the world’s most valuable carmaker with a market capitalization of around $468 billion, but less than two-thirds from the record reached in November 2021. Its valuation has always been based on hopes for strong sales of electric cars and success in driving drive freely.

Since the publication of the Reuters article about the Model 2 strategy change, analysts have noted that the change could lead to an exodus of investors who had bet on rapid sales growth. These investors, analysts say, could be replaced by others who are willing to wait for Teslas to drive themselves.

Mr. Musk has been predicting the imminent arrival of fully self-driving cars for years, but it could still be years before they see the light of day, due to significant engineering and regulatory challenges. Tesla is facing lawsuits and investigations over its Self-Driving Systems and Fully Self-Driving Systems, which do not make cars fully autonomous.

Musk raised more questions in his recent social media posts about Tesla’s self-driving car strategy. He recently announced the “unveiling of Robotaxi” on “8/8”, which is said to mean August 2024, and later said that “autonomous” autonomy was a “blindly obvious” decision.

To attract consumer interest, Tesla recently offered a free trial of fully autonomous driving and, over the weekend, reduced the price of the option from $12,000 to $8,000.

As Tesla looks to boost sales and margins, it may not be helped much by its latest model, the Cybertruck, which has struggled to mass produce. The company doesn’t release production figures for the pickup separately, but last week it recalled nearly 3,900 vehicles produced between its inception last November and last month.

On Tuesday, investors will be looking to see if Musk will maintain his goal of producing 200,000 Cybertrucks by 2025. Musk said the model will not generate good cash flow until 2025.