Tesla's financial report disappoints, Musk cuts costs and accelerates the release of new affordable cars

Tesla released its first-quarter financial report after market close yesterday. Due to price reductions to boost sales squeezing profits, as well as a decrease in vehicle deliveries, the gross profit margin fell to 17.4%, the lowest since 2019. Tesla's stock price has dropped 42% year-to-date. CEO Musk had to lay off employees to cut costs and will accelerate the launch of a new affordable electric vehicle. The stock price surged more than 13% after hours.

Hit by Chinese Price Competition, Gross Margin Shrinks to 17.4%

Tesla's first-quarter revenue plummeted, marking the largest year-over-year decline since 2012, with the gross margin also continuously decreasing to just 17.4%. Production disruptions at the Fremont factory for Model 3 updates and in Germany led to a decrease in vehicle deliveries. Facing competition from Chinese car manufacturers, Tesla had to lower prices to compete. The operating margin dropped to 5.5%. However, revenue from its energy storage and service segments continued to grow, albeit on a smaller scale and contributing minimally to the overall revenue.

Tesla continues to expand its capital expenditure to $2.7 billion, including an additional $1 billion spent on artificial intelligence. This caused its free cash flow to decrease from $2 billion in the previous quarter to -$2.5 billion.

Musk Cuts Costs and Accelerates Launch of New Affordable Car

Tesla has faced price competition from Chinese car manufacturers this year, coupled with slow recovery in the overall automotive market, resulting in a 42% decline in its stock price year-to-date. CEO Musk had to lay off employees to cut costs and recently canceled his trip to India due to busy schedules.

Chinese electric vehicles are gaining market share! Rumors suggest Tesla may lay off 10% of its workforce, putting about 14,000 employees' jobs at risk.

Under pressure, Musk also mentioned during the conference call that the company will expedite the launch of a new affordable electric vehicle. The affordable model aims to achieve the expected maximum production capacity of nearly 3 million vehicles while reducing costs. Musk also announced that their self-driving taxi, "Robotaxi," will continue to pursue a revolutionary "unboxing" manufacturing strategy. He previewed the design of the company's ride-hailing app and previously hinted in a tweet that Robotaxi will be launched on 8/8.

Perhaps the poor Tesla financial results were already anticipated, as the stock price surged more than 13% in after-hours trading following the earnings announcement.

Tesla Holds 10,800 Bitcoins, Did Not Sell Any

After purchasing 48,000 bitcoins in 2021, Tesla sold 4,800 bitcoins in the first quarter of 2021 and 32,400 bitcoins in the second quarter of 2022. Since then, there have been no further transactions, leaving Tesla with 10,800 bitcoins in inventory, valued at $184 million.