Shares fall despite CEO’s claim that plans for ‘autonomous fleet’ will transform its market value

Tesla’s gross margin fell slightly to 18% in the second quarter, down from a peak of 29.1% in the first quarter of 2022 © David Zalubowski/AP

Tesla profits slumped 45 per cent in the second quarter as the world’s largest electric vehicle maker faced slower sales, soaring costs from employee lay-offs and ever-greater investments in its artificial intelligence infrastructure.

Elon Musk, Tesla’s billionaire chief executive, also used the company’s quarterly earnings announcement on Tuesday to officially postpone the planned unveiling of Tesla’s first “robotaxis” — a fleet of self-driving taxis.
Despite the two-month delay from August to October, Musk claimed the project to turn all Tesla vehicles into a “giant autonomous fleet” could take the company’s valuation as high as $5tn — about six times its current market value.

Tesla’s net income for the second quarter was $1.47bn, well short of analysts’ $1.9bn consensus estimate. Its shares fell over 8 per cent in after-hours trading.

Revenues rose 2 per cent to $25.5bn, narrowly exceeding expectations, due to record growth in its energy storage business and an unusually large sum of regulatory credits related to emissions requirements.

The energy storage business, which manufacturers batteries for homes and businesses, deployed 9,400 megawatt hours in the second quarter, more than double its provision in the first three months of the year.

However, Tesla’s operating expenses soared 39 per cent during the quarter to almost $3bn. In April, it announced plans to cut 10 per cent of its workforce, about 14,000 people, incurring large restructuring and legal costs.

Tesla has also been investing heavily in its AI infrastructure, including extending its “gigafactory” in Texas to house a cluster of 50,000 supercomputer H100 chips for full self-driving training.

Tesla’s gross margin fell slightly to 18 per cent in the quarter, down from a peak of 29.1 per cent in the first quarter of 2022. The closely watched financial metric was flattered by record $890mn revenues from regulatory credits related to emissions requirements in the second quarter. Without those, Tesla’s automotive gross margin would have slumped to 14.6 per cent.

Musk has focused work on an autonomous taxi service in recent months, prioritising the project over developing a long-awaited affordable EV, known unofficially as the Model 2 that will be priced at $25,000. He first outlined plans for a shared network of fully autonomous vehicles in 2016, saying it would help Tesla owners offset the cost of owning their vehicles.

Musk has also increased Tesla’s focus on developing Optimus, an autonomous humanoid robot. On Tuesday, he said Optimus robots were already performing tasks in Tesla factories and that it would begin limited production next year. Musk added that Tesla expected to produce the robots for consumer use in 2026.

“The value of Tesla, overwhelmingly, is autonomy,” he said. “If you believe Tesla will solve autonomy you should buy Tesla stock, and all other questions are . . . noise.”

Earlier this month, Tesla said it had delivered almost 444,000 EVs between April and June, down 4.7 per cent from a year earlier, but rebounding from a disappointing 387,000 in the first quarter. The sales were enough to retain its position as the largest EV company ahead of China’s BYD.

Even by Musk’s standards, Tesla has had an eventful 2024. The billionaire entrepreneur won two contentious votes at the company’s annual meeting last month when shareholders reapproved his historic $56bn pay award — which had been struck down by a Delaware court — and backed a proposal to reincorporate the company in Texas.

He followed these victories by pledging to move his social media company X and SpaceX to Texas from California as part of a long-standing dispute with California governor Gavin Newsom.

Musk has also emerged as one of the most prominent Silicon Valley figures to back former president Donald Trump in November’s US election.

Musk endorsed Trump shortly after the attempt on his life on July 13, and has helped set up a political action committee through which a number of technology investors and business executives will donate to his campaign. Musk has denied reports that he will personally donate $45mn a month to the Trump campaign.

Trump has promised to end federal support for EVs, which he has blamed for damaging America’s car industry and criticised for being too expensive and made in China.

However, as he has stepped up communication with Musk in recent months, he appeared to soften his stance. “I’m constantly talking about electric vehicles but I don’t mean I’m against them. I’m totally for them,” Trump said at a rally in Michigan last weekend.

Tesla’s stock has fallen 8 per cent in the past 12 months and its market capitalisation has almost halved from its peak of $1.2tn in November 2021.

Additional reporting by Nicholas Megaw