Tesla's price cuts and incentives to drum up sales in a toughly contested market led to automotive gross margins, excluding regulatory credits, of 14.6% for the second quarter, missing analysts' estimates of 16.29%, per Visible Alpha.
"Until Tesla is able to begin production of new lower-cost models, which the company expects in H1 2025, we believe pricing/incentives could remain a key demand lever and weigh on margins," said Goldman Sachs analysts in a note.
The company's stock price tumbled 7.9% to USD 226.40 in early U.S. pre-market trading, setting Tesla on track to lose about USD 63.7 billion in market value. Tesla's EV deliveries have fallen for two straight quarters as the lack of affordable new models turns buyers to rival EV makers.
These rivals, CEO Elon Musk said on a post-earnings call, "have discounted their EVs very substantially, which has made it a bit more difficult for Tesla."
However, these "sequential fluctuations in automotive gross margin hardly warrant mention" given Tesla's wider ambition of commercializing self-driving software and other A.I.-enabled products, said Alexander Potter, a senior research analyst at Piper Sandler.
Over the years, Musk has promoted Tesla as a technology company, with self-driving technology as the key. He said on Tuesday he would be shocked if there were no self-driving Tesla vehicles, without human supervision, next year.
If not the technology, some analysts were sceptical about the timeline.
"We do worry about the company's ability to secure regulatory approvals and don't see a 2025 timeline as realistic for a service offering," RBC's Tom Narayan said.
Still, despite the disappointing quarterly results, only one of the 50 analysts covering the stock cut their rating, while there were three price target increases and two decreases, per LSEG data.
The net result is that analysts, on average, still rate the stock a "hold" though their median price target of USD 212.50 indicates they expect the price to fall 13% over the next few months, the data shows.
The stock had slipped 0.85% this year through Tuesday's close, compared to a 16% rise in the S&P 500 index.
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