Tesla Reports 45% Drop in Profits as AI Costs Rise, Vehicle Prices Fall

Tesla (TSLA) shares tumbled in extended trading Tuesday after the electric vehicle (EV) maker reported second-quarter profits dropped 45% from a year ago, as costs for development of artificial intelligence (AI) projects rose, while the average sale price of its vehicles fell. 

The drop in profits came despite a 2% bump in revenue from last year to $25.5 billion, above the $24.98 billion analysts had expected, according to estimates compiled by Visible Alpha.

Lower average sale price and lower delivery numbers than the company reported in the second quarter of 2023 impacted the EV giant’s profitability, with a reported $1.48 billion in profit, down from $2.7 billion last year and below estimates.

Tesla Focuses on Cutting Costs, Development of Robotaxi, Lower-Cost Models

Tesla said it has a number of key areas of focus on going forward, including reducing the average cost per vehicle, along with developing projects in the AI space like its robotaxi and humanoid robots, which CEO Elon Musk recently said will be in “low production” and working in Tesla factories by next year. The company also said its plans to begin producing a “more affordable” vehicle by the first half of 2025 remain on track.

In the company’s earnings call, Tesla said its Robtaxi event would be delayed to Oct. 10, after Musk said last week that the event would be postponed from its initial date of Aug. 8.

“Though timing of Robotaxi deployment depends on technological advancement and regulatory approval, we are working vigorously on this opportunity given the outsized potential value,” the company said in its earnings release.

Tesla shares were down 8.5% to $225.42 in extended trading as of 7 p.m. ET Tuesday following the release, after falling 2% in the day’s regular trading session.

UPDATE—July 23, 2024: This article has been updated to reflect more recent share price values and additional information from Tesla’s earnings call.