- Tesla got off to a tough start this year.
- The EV maker reported disappointing first-quarter delivery results before announcing across-the-board layoffs.
- Tesla is in a difficult position due to declining demand in the United States and increasing competition in China.
Tesla is in serious cost-cutting mode.
After releasing a dismal first-quarter sales report this month, CEO Elon Musk announced that the company would unveil its long-awaited robotaxis in August.
However, this announcement was quickly overshadowed by large-scale layoffs, according to Musk. to cause Plan to reorganize and improve efficiency “for the next stage of growth.”
Tesla announced that it will cut more than 10% of its workforce, or more than 14,000 people. Tesla is also set to lose several key executives. Drew Baglino and Logan Patel announced this week that they are leaving the company. Mr. Baglino was senior vice president of powertrain and energy engineering, and Mr. Patel was vice president of public policy and business development.
It's unclear exactly what new self-driving, revenue-generating products Tesla plans to unveil in August. And in the months since then, investors have been looking for more than just a rehash of the robotaxi dream.
This isn't the first time Musk has promised self-driving taxis.
Musk said in 2019 that he expected Tesla to have 1 million cars on the road next year that function as robotaxis.
“I believe we will create the most profitable self-driving taxi on the market,” he said at an earnings conference in April of the same year.
In a separate fundraising call around the same time, he said full self-driving could push Tesla's valuation to $500 billion, and Tesla could be worth up to $250,000, he said. CNBC reported at the time. He also reportedly said that Tesla's robotaxis would be capable of working 100 hours a week for their owners.
In the years since then, Tesla's fully self-driving software (which remains at Level 2, even as competing automakers have reached Level 3 and above) has expanded to more vehicles as Tesla continues to outperform its competitors. It has been expanded to. In fact, its market capitalization has reached $500 billion, just as Musk predicted. And we finally turned a profit.
But robotaxis never materialized, even though Musk continued to tout FSD as a continued linchpin of Tesla's growth.
Now cheaper EVs are hurting Musk's plans
Tesla will launch an all-out price war in 2023, cutting prices by up to $20,000 to boost sales and stay ahead of competitors, lowering the average new car price of its best-selling model (approximately $47,000 as of March 2024). dollar). .
More than a year later, while some other automakers are reconsidering their EV plans, Tesla has largely maintained its price advantage thanks to industry-leading profit margins.
But Tesla may not remain the price leader forever. According to Reuters, Tesla has ended plans for another of Musk's long-standing projects: a truly affordable electric vehicle. The car, also known as the Model 2, is expected to cost $25,000, about $14,000 less than Tesla's cheapest sedan.
Musk has disputed the report, which cited internal documents and people familiar with the matter, leaving analysts wondering what will happen next.
After years of lightning-fast growth, it's not inconceivable that Tesla would cut its workforce, but instead build a brand new factory to churn out a completely new (and still unprofitable) product. This may indicate a demand problem, especially after the
“While the large-scale layoffs announced yesterday represent a reduction in staffed production capacity, the decline in deliveries is due to a decline in deliveries rather than supply,” JPMorgan analyst Ryan Brinkman said in a note to clients on Tuesday. There is no doubt that this is due to a decrease in demand.” This is because the stock price has fallen to its lowest level in more than a year.
Kelley Blue Book data also points to weak demand, showing Tesla's share of the U.S. EV market has fallen from 62% in 2023 to 51% this year.
And Tesla faces increasing competition in China, where it is now neck-and-neck with homegrown EV startups like BYD, which are exporting cheaper cars to Europe, Asia and Mexico. and the pressure is increasing..
Musk is sure to face questions about the Model 2 when he reports earnings on April 23rd. Analysts will also be looking at how robotaxis can turn a profit.
“Investors should look to see how the company can use its infrastructure and network to achieve a path to profitability,” Adam Jonas, a longtime Tesla bull, said in an April 11 note to clients. I'm struggling to do that,” he said.
And first, they need to be road legal.