Elon Musk’s ‘other world’ approach to corporate reporting caught up with him and Tesla on Wednesday, with the shares shedding 12% of their value and helping drag Wall Street stocks lower.
Other factors also contributed to Wall Street's slide in another multi-year slump. For instance, Alphabet’s $5 billion casually invested in the loss-making Waymo self-driving vehicle project didn’t help it or Tesla, where Musk is determined to pursue his much-delayed Robotaxi CyberCab.
However, it was the less-than-convincing quarterly financials that investors focused on after the shares had slid 8% in after-hours trading on Tuesday. Musk was adroit in pointing out the rising number of rival EVs on the road but ignored the missteps the company is taking on product updates, recalls, and marketing.
The shares fell 12% in early trading on Wednesday and remained down that amount throughout the session.
Musk was more focused on Wednesday when speaking to analysts than he was in the after-results briefing the evening before.
“There have been quite a few competing electric vehicles that have entered the market, and mostly, they have not done well. But they have discounted their EVs quite substantially, which has made it a bit more difficult for Tesla,” Musk told analysts on Wednesday.
The earnings release revealed two consecutive quarters of declining profits and the lowest profit margins in years on its iconic vehicles.
The extra competition is greatest in Tesla's most vital market—China, home to its biggest plant in Shanghai, which is also a major exporter.
Revenue from government credits increased to $890 million in the June quarter, accounting for more than half of the company’s profits. A strong performance by the company's batteries and energy storage business also bolstered returns.
Dan Ives, a managing director of equity research at the investment firm Wedbush and a long-time bull on Tesla, downplayed the weaker-than-expected earnings report and highlighted potential gains from the company’s development of autonomous vehicles.
“We were not looking for major fireworks this quarter from Tesla,” Ives said on Wednesday in a note to investors. “The next phase of the Tesla growth story is around autonomous vehicles, Robotaxis, and AI playing out for Musk & Co. in our view, and that vision is on the doorstep."
Tesla’s self-driving product, though, is under pressure. In December, Tesla had to recall about 2 million cars over a safety issue tied to its autopilot system. Two months later, the company recalled around 360,000 more cars over crash risks tied to its self-driving system.
Musk said on Tuesday’s post-results briefing that the company is delaying the launch of its Robotaxi service until October.
