Tesla’s bleak margins sour investors as Musk hypes everything but cars

Tesla shares sank 12 per cent on Wednesday, knocking almost $100 billion (€92.25bn) from stock market value, after chief executive Elon Musk’s talk of humanoid robots and driverless taxis failed to comfort investors worried about the electric car-maker’s shrinking profit margins.

Tesla posted its lowest quarterly profit margin in five years late on Tuesday, with earnings per share missing estimates for the fourth consecutive quarter.

The sell-off left Tesla’s market capitalisation at $700 billion, down from over $1 trillion in 2021. Still the world’s most valuable car-maker, Tesla’s valuation relies on investor expectations of big future profits driven by yet-to-launch products such as its promised robotaxis and robots.

“All of Musk's enthusiasm on the call, outside of (energy) storage, were for products that don't exist,” said TD Cowen's Jeff Osborne.

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Tesla’s EV deliveries have fallen for two straight quarters, and it has not introduced a lower-cost model that many expected, causing buyers to turn to rival EV-makers. Tesla has been forced to cut prices and boost incentives to drum up sales of its ageing vehicle line-up. Mr Musk said rivals “have discounted their EVs very substantially, which has made it a bit more difficult for Tesla”.

The company said the cheaper models it expects to bring out in the first half of 2025 would result in less cost reduction than previously expected, while delaying a widely-awaited event for its robotaxi to October.

“Tesla is not being priced on auto, but autonomy and AI...We believe any pay-off from [Tesla’s AI] initiatives [is] further out,” wrote UBS analyst Joseph Spak, reiterating a “sell” rating on the stock. – Reuters