Tesla Reports Significant Profit Decline Amid Leadership Changes

Tesla has concluded the previous quarter with notable drops in revenue and profit following a model update and controversies surrounding CEO Elon Musk's political involvement. The company's revenue decreased by nine percent year-over-year to approximately $19.3 billion, while net profit plummeted by 71 percent to $409 million compared to the same period last year. In response to these results, Musk announced his intention to focus more on Tesla starting in May.

The reported figures fell short of analysts' expectations, who had projected an average revenue of over $21 billion. The adjusted earnings per share came in at $0.27, while market analysts had anticipated approximately $0.39.

Tesla also confirmed plans to begin production of more affordable model variants within the first half of 2025. Furthermore, the company reiterated its commitment to manufacturing a robotaxi without a steering wheel or pedals by 2026.

Tesla's delivery numbers did not surprise observers, as they had dropped by 13 percent to 336,681 vehicles in the first quarter. Identifying the precise reasons for this decline is complex, but a shift to a revamped version of the popular Model Y may have played a role. Earlier this year, Tesla updated its production lines, causing a temporary halt in manufacturing, which likely diminished incentives for customers to purchase the previous Model Y variant.

Additionally, Musk's political activities have cast a shadow over Tesla's business. The tech billionaire has become a close ally of former President Donald Trump, contributing over $250 million to his campaign for the White House. During his presidency, Trump tasked Musk with reducing government expenditures, prompting criticism regarding Musk's aggressive approach to budget cuts in Washington. Some analysts, like Dan Ives from Wedbush Securities, suggest that Musk's actions may have a lasting negative impact on Tesla's brand, potentially reducing demand by 15 to 20 percent.

In light of the quarterly results, Musk stated his intention to devote significantly less time to Trump-related activities and refocus on Tesla operations. Following this announcement, Tesla's stock saw an increase of approximately four percent in after-hours trading.

Musk has also emphasized that self-driving cars are vital for Tesla's future. A robotaxi service is set to launch in Austin, Texas, by the end of June, utilizing 10 to 20 Model Y vehicles. The anticipated production of a fully autonomous Tesla without traditional driving controls is scheduled for 2026. In situations where issues arise, Tesla plans to utilize remote control operations.

According to Musk, many existing Tesla vehicles are already equipped with the necessary technology for autonomous driving. The company aims to enable this feature for private users in several U.S. cities within the year, allowing drivers to relax while the car navigates to their destinations. This vision was initially proposed by Musk in 2017, with a two-year timeline for implementation.

However, skepticism persists within the industry regarding Musk's self-driving car promises. Many experts and competitors question the feasibility of achieving full autonomy using only cameras and AI software, as opposed to the more expensive laser radars employed by rivals such as Waymo, a subsidiary of Google. Critics argue that relying solely on cameras may not provide sufficient safety.

Other manufacturers have firmly rejected the notion of deploying autonomous vehicles that rely exclusively on camera technology. For instance, BMW's head of development, Frank Weber, recently stated that it is clear such an approach is unviable, citing the inability of cameras to detect obstacles like debris on the road.

Musk has contended that Tesla's pricing advantages will enable the company to capture over 90 percent of the robotaxi market share quickly. He has also dismissed concerns about glare from bright sunlight affecting camera performance.

Nevertheless, Musk acknowledged that regulatory hurdles could impede the ambitious autonomy plans, as U.S. transportation authorities have previously suspended permissions for self-driving vehicles in response to issues.