As Elon Musk pivots to robots and AI, he wants investors to stop thinking of Tesla as simply an automaker.
Yet to fund those bets, he is relying on a car business that is under mounting pressure, as the company’s second-quarter results on Wednesday showed.
Shares were down about 4% in extended trading.
The profit miss and cash burn come despite record vehicle deliveries in the quarter as a fuel-price surge sparked by the Iran war drove EV demand, especially in Europe, and Tesla deployed more energy storage products.
More car sales, lower profit
The sales rebound was a bright spot, but there were also signs of strain on the core car business.
Lower average selling prices hurt Tesla’s profitability, as it faces tougher competition across its biggest markets.
Average revenue from each Tesla sold in the quarter dropped to $42,730, from $45,345.
Money from regulatory credits, sold to traditional automakers that did not meet emissions standards, is also drying up after a policy change, falling by about two-thirds from a year earlier, to $146 million.
The profitability squeeze on Tesla’s car business will make it harder to fund Musk’s spending plans — more than $25 billion this year, nearly triple what the company spent last year, to pay for AI-powered self-driving technology, robotaxis and humanoid robots.
“This is a massive capex year, but I’m confident that all the things that we are investing in will yield incredible returns,” Musk said on a post-earnings conference call with analysts.
To boost profitability, Tesla is counting on its advanced driver assistance software — called Full Self-Driving Supervised — to spur future car sales and revenue growth.
Tesla said it finished the quarter with about 1.5 million active FSD subscriptions, up 56% from a year earlier.
The company received approval in April to deploy FSD in the Netherlands, and some other European countries have also allowed the technology following the Dutch approval. Tesla is also pushing for approval in China.
While much of Tesla’s valuation hangs on the promise of potentially high-margin revenue streams, the spending is heightening investor scrutiny.
“Monetisation remains the central concern following the earnings miss,” said Ryan Lee, senior vice president of product and strategy at exchange-traded product firm Direxion.
“The question is how quickly those investments can begin supporting the valuation.”
Tesla made capital expenditures of $5.8 billion in the second quarter, more than double the amount of the year-ago period and the first quarter.
That pushed free cash flow to negative $1.1 billion. Analysts had expected a cash burn of $3.3 billion.
