Tesla skids as Q2 earnings miss on soft auto margins and EV sales

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Investing.com -- Tesla posted Tuesday mixed second-quarter results as earnings fell short of estimates as weaker margins and falling EV sales weighed on performance. 

Tesla Inc (NASDAQ:TSLA) plunged nearly 8% in premarket trading Wednesday. 

For Q2, the company reported adjusted earnings per share (EPS) of $0.52 on revenue of $25.5 billion, compared with Wall Street estimates of $0.61 a share and $24.33B, respectively.

The bottom line was pressured by a fall in automotive sales to $18.53B from $20.42B a year earlier and weaker-than-expected margins amid pressure from EV price cuts, restructuring charges and costs related to investment into AI projects.   

Gross margins excluding credits, a closely watched metric, fell to 14.7% in Q2 from 18.1% a year earlier, missing analysts' estimates of 16.3%. 

"Until Tesla is able to begin production of new lower-cost models, which the company expects in 1H25, we believe pricing/incentives could remain a key demand lever and weigh on margins,” Goldman Sachs analysts commented.

“We believe a key debate from here will be around the extent that new models are differentiated enough on price and/or features compared to current offerings to drive improved volume growth,” they added.

Tesla delivered 443,956 EVs during the quarter, down 5% from the same period a year earlier.

The company's energy storage business was a bright spot in the quarter, deploying 9.4 gigawatts in Q2, up 158% from a year earlier. 

Excluding $622 million in restructuring and other charges, the adjusted EBITDA would have been $4,296 million with a 16.8% margin, which is 10.8% higher than the consensus estimate.

Looking ahead, Tesla reiterated that vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as the company works on the launch of next-generation vehicle and other products.

"Plans for new vehicles, including more affordable models, remain on track for start of production in the first half of 2025," the company said.

In a post-earnings note, Stifel analysts said Tesla’s report presents “a mixed bag” and is likely to weigh on its shares following recent outperformance. 

They believe the bears will likely focus on margins miss, below-consensus FCF, a challenging outlook for auto margins in the second half of the year. 

On the positive side, Stifel highlighted the adjusted EBITDA beating consensus estimates by nearly 11%, strong Energy Generation and Storage revenue and margins, and continuing progress on the Full-Self Driving (FSD) solution.

(Yasin Ebrahim contributed to this report)