New York (AFP) – Tesla reported a 71 percent drop in first-quarter profits Tuesday in results that lagged analyst estimates as Elon Musk’s automaker warned of a hit to demand due to “changing political sentiment.” The electric vehicle producer reported profits of $409 million following a drop in auto sales that analysts said reflected brand damage due to Musk’s work for the Trump administration. Revenues fell nine percent to $19.3 billion.
The company retreated from its 2025 guidance, citing unpredictability over trade policy and demand. “Uncertainty in the automotive and energy markets continues to increase as rapidly evolving trade policy adversely impacts the global supply chain and cost structure of Tesla and our peers,” the company said. “This dynamic, along with changing political sentiment, could have a meaningful impact on demand for our products in the near-term.”
On the positive side, Tesla said it was on track to launch new vehicles “including more affordable models” in the first half of 2025. The statement followed a report last week that the company planned to delay the launch. Analysts have cited a stale portfolio of vehicles as among the challenges facing the company. Musk is expected to speak later Tuesday on a conference call with investors and analysts, some of whom have called on the billionaire to announce a plan to exit the Trump administration in order to focus on Tesla.
Musk, the world’s richest person, donated more than $270 million to Trump’s 2024 presidential campaign. Analysts warn of significant brand damage to Tesla from Musk’s leadership role in the “Department of Government Efficiency,” which has granted itself access to government databases with sensitive personal information and implemented thousands of job cuts.
– Robotaxi on track –
The shakeup to US government operations has led to questions about programs like the Social Security retirement benefit and the continuation of programs like hurricane forecasting. Wedbush Securities analyst Dan Ives said it will be a “Code Red” situation if Musk remains at DOGE, noting that “Tesla’s stock has been crushed since Trump stepped back into the White House,” according to a note released earlier this week.
In January, Tesla confirmed plans to unveil new, more affordable vehicles in the first half of 2025, a move that helped mute criticism that the EV maker’s lineup has gotten stale. But a Reuters report last week said Tesla was pushing back the launch of a lower-cost Model Y SUV by a “few months” for reasons that were unclear. Besides confirming the new vehicles as on time, Tesla also reiterated that a robotaxi launch was on track for June, according to its press release.
Ives, who has implored Musk to significantly scale back his work on DOGE, said he must also map out a timeline and “hard facts” around the company’s ambitious autonomous driving and robotics ventures. Analysts at Morgan Stanley meanwhile said Tesla may also unveil restructuring efforts to cut costs in light of weaker profit margins due in part to the heavy investments in new technologies.
Tesla’s stock reaction will also be influenced by whether there is a “sense of increased attention from their CEO,” Morgan Stanley said. “Investors will be searching for any signs of Tesla’s CEO reprioritizing the efforts of Tesla vs. politically oriented endeavors,” Morgan Stanley said. Tesla shares were little changed in after-hours trading.
© 2024 AFP
