The generally monetary information appears that Tesla's circumstance is undoubtedly not hopeful. In spite of the fact that the company's income developed within the most recent quarter, this was primarily due to the commitment of non-core businesses, whereas the execution of the center car fabricating commerce was not perfect. Particularly:
1，The income development of the center car deals commerce was as it were 2.3%, appearing powerless development force. This demonstrates that Tesla's center commerce development is debilitating.
2，Other businesses such as administrative credit deals, vitality items and administrations have contributed the larger part of income development. This suggests that Tesla is attempting to depend on non-core businesses to bolster its by and large execution, but the supportability of this approach is flawed.
3，If the commitment of these non-core businesses is prohibited, Tesla's center commerce income may have really declined. This postures certain concerns for its long-term advancement prospects.
In rundown, whereas Tesla's top-line income has developed, this growth is generally driven by non-core businesses instead of the company's core automotive fabricating operations. The frail execution of Tesla's center commerce could be a cause for concern and seem affect the company's long-term improvement direction in case not tended to viably.
It's worth recognizing that the company's in general income has developed year-over-year, expanding from $2.49 billion in Q2 2023 to $2.55 billion, a 2.3% increment. Typically incompletely inferable to the solid execution of non-core businesses such as administrative credit deals, vitality items and administrations.
However, the company's core automotive sales business experienced a 9.3% decline in revenue, dropping from $2.04 billion to $1.85 billion. The primary reason behind this decline is the decrease in delivery volumes, which fell from 466,140 units in Q2 2023 to 443,956 units.
Administration famous that the around 13,000 decrease in conveyance volumes was due to the company's ramp-up stage for the updated Show 3 generation at the Fremont production line. Be that as it may, the in general decay of 22,184 units in conveyance volumes recommends there are other issues at play as well. More concerning is the reality that indeed when considering the roughly 4,000 unit increment in conveyances from the modern Show S, Show X, and Cybertruck models, the entire conveyance volume still shown a descending drift.
Furthermore, the company has also been impacted by a "price war". Although management did not disclose the specific extent to which price changes affected revenue, they confirmed that this was one of the primary reasons behind the revenue decline.
In summary, while Tesla has made progress in some non-core business areas, the performance of its core automotive sales business is concerning. The company needs to pay close attention to and effectively address these issues to ensure its future sustainable development.
The financial performance in the first half of 2024 compared to the first half of 2023 is very similar to the performance in the second quarter of this year compared to the same period last year. While the company's some businesses are growing, with declining vehicle prices and a significant drop in delivery volumes, earnings and cash flow are declining significantly.
This is just one of the many challenges that Tesla is currently facing. That is, the growing competition in the electric vehicle (EV) market. The prices of electric vehicles are rapidly converging with those of gasoline-powered vehicles. It is estimated that by 2027, the prices of electric vehicles may even be lower than those of gasoline-powered vehicles.
This is not only the case in the Chinese market, but also in the U.S. market. In order to compete in the U.S. market, all electric vehicle manufacturers will start to face pricing pressure.
Contrary to some statements made in the past few months, the sales volume of electric vehicles in the U.S. has not declined. In the second quarter of 2024, 330,463 electric vehicles were sold in the U.S. This represents an 11.9% increase compared to 295,355 units sold in the same period last year. However, during this period, Tesla reported a 6.3% decline in total U.S. electric vehicle sales. In fact, the company's market share continued to decline, reaching 49.7% in the second quarter, down from 52.1% in the first quarter and 59.3% in the second quarter of 2023. Other companies performed much better. Hyundai-Kia reported that their market share increased from 7.3% in Q2 2023 to 11.2% in the same period this year. General Motors' market share increased from 5.3% to 6.6%, and Ford's market share grew from 5% to 7.2%. Even some of the fringe players in the electric vehicle space have performed well, with some companies seeing an increase in their market share year-over-year in the second quarter.
While Tesla is no longer seen as the absolute benchmark in the electric vehicle (EV) industry, it still maintains a leading position. According to the latest report from Car and Driver magazine, only the Tesla Model 3 made it into the top 9 best electric vehicles list in the U.S., ranking fourth. This indicates that Tesla's dominance in the EV market has decreased to some extent.
However, analysts have also pointed out that the Model 3 is still the second-best electric vehicle in the luxury category. This suggests that in terms of EV quality and pricing of certain models, Tesla still maintains a leading position. It has not been completely pushed out of the market, but is facing challenges from other brands, leading to a decline in its market position.
Overall, while Tesla's leading position in the EV industry has declined, its advantages in product quality and pricing still remain, and it continues to be an important force in this field. This indicates that Tesla needs to continue innovating, respond to the pressure from competitors, and maintain its market share and reputation.
In the past, Tesla has enjoyed hefty profits due to its market-leading position. However, the latest data suggests that this trend may have changed.
Comparing the data, Tesla's key financial metrics in the most recent quarter, such as net profit margin, operating cash flow margin, adjusted operating cash flow margin, and EBITDA margin, have all seen declines. These critical indicators have decreased compared to the same period last year.
More notably, these indicators have also declined in the first half of this year compared to the first half of 2023.
This reflects that the industry in which Tesla operates is facing intensified competition. Under the pressure of a price war, Tesla's profit margins are further contracting. At the same time, the decline in production and delivery volumes is also almost certain to occur in the future.
This situation is concerning. Whether Tesla can continue to maintain its industry-leading position will be a focus of investor attention. The company needs to closely monitor market dynamics and take effective measures to address the intense competition, in order to maintain its profitability and market position.
Overall, Tesla is facing a period of intensified competition, which poses challenges to its profit margins. The company needs to respond cautiously to maintain its industry advantage.
To make matters worse, Tesla's predicament also includes some non-fundamental factors. Some of the actions taken by Elon Musk can be understood as reckless at best, or completely harmful to the company at worst. First, there is the company's decision to pay him $55.8 billion in compensation. This plan can be traced back to 2018. Earlier this year, the Delaware Court of Chancery issued an opinion that this award should be rescinded. In short, at the company's annual shareholder meeting, shareholders deemed "disinterested" voted to support a compensation plan that will greatly increase Musk's ownership in the company. However, the next hearing on this matter is scheduled for August 2 this year to determine whether this will ultimately go through.
Another concerning issue is Musk's ownership of xAI, a company focused on developing large language models and AI, with the aim of competing with other players like OpenAI and ChatGPT. If this was just another side project like SpaceX, that would be a different matter. However, Musk has been actively transferring Tesla's AI chips to xAI and Twitter, and poaching employees from Tesla to work on this technology. Even though xAI is not a Tesla subsidiary, he is still doing this. Additionally, he has decided to propose to Tesla's board that Tesla invest $5 billion into this project, at a time when Musk himself acknowledges the fierce competition in the electric vehicle sector, giving investors every reason to be concerned. This behavior may distract Tesla's management and divert resources from its core business to uncertain new ventures.
It is also worth noting that these self-serving transactions have not generated much profit for the company in the past. As early as 2016, Musk had Tesla acquire his other company SolarCity, which was a $2.15 billion all-stock transaction at the time. But considering Tesla's current stock price and the two stock splits the company has undergone, this transaction is now worth the equivalent of $38.74 billion. For a company that has only generated $3.09 billion in gross profit for Tesla shareholders since then, it is clear that this transaction has been detrimental to the company so far. It is undeniable that the energy generation and storage division is now finally starting to perform well. So the situation may ultimately change. But even allocating this capital to almost anything else would likely be more profitable.
The only potential lifeline for the company may be its entry into the self-driving taxi market, a market that Musk himself has praised. However, moving in this direction also comes with significant risks and costs.
