Tesla grows revenue 42%, but automotive margins decline (2024)

FAQs

Why is Tesla's profit margin so low? ›

Tesla's profit margin is getting hammered by EV discounts and hefty AI spending. Tesla's adjusted operating margin shrank to its lowest in three years in the second quarter. The company has been trying to stem a decline in auto sales by offering big incentives and steep discounts.

Tesla recorded automotive gross margin excluding regulatory credits of 14.6% in the second quarter, compared with estimates of 16.29%, according to 20 analysts polled by Visible Alpha.

Telsa profit in the second quarter plunged more than 40% from a year ago, as the electric vehicle company has faced both more EV competition from established automakers and a slowing of overall EV sales growth.

Current and historical operating margin for Tesla (TSLA) over the last 10 years. The current operating profit margin for Tesla as of June 30, 2024 is 6.82%. Tesla is the market leader in battery-powered electric car sales in the United States, with roughly 70% market share.

Shares in Tesla are down sharply premarket on the company's results. Profits plunged 45 percent year on year in the second quarter, and the company's operating margin fell to 6.3 percent from 9.6 percent a year ago. That's despite Tesla cutting costs and laying off more than 10 percent of its global work force.

While traditional automakers have responded by utilizing a lot of discounts and rebates on their electric models, Tesla has slashed the sticker prices to compete. These price drops, combined with lower consumer demand, have had a cascade effect on the used market causing pre-owned electric model values to plummet.

NAGOYA, Japan -- Toyota Motor has enjoyed a rapid recovery in profitability driven by a weak yen and price hikes, with its profit margin outpacing Tesla's during the April-September period for the first time in more than two years.

Ferrari Purosangue

The German marque sold 320,221 cars in 2023, with the 911 posting the highest sales growth and its SUVs making up 55 per cent of its global volume. Porsche would need to sell six cars to beat Ferrari's 2023 profit per unit.

“Charlie and I for long have felt that the auto industry is just too tough,” Buffett said. “It's just a business where you've got a lot of worldwide competitors, they're not going to go away. And it looks like there are winners at any given time, but it doesn't get you a permanent place.”

What is the downfall of Tesla? ›

Tesla lays off more than 10% of its workforce

The company has suffered from falling demand and competition from cheaper Chinese imports which has led its stock price to collapse by 43% over 2024. Figures for the first quarter of 2024 revealed revenues of $21.3bn, down on analysts' predictions of just over $22bn.

Since January, the electric carmaker has also faced a number of setbacks including its first year-over-year sales decline since the pandemic, hundreds of thousands of layoffs, and the possible shuttering of a planned low-cost EV.

Current and historical gross margin, operating margin and net profit margin for Tesla (TSLA) over the last 10 years. Profit margin can be defined as the percentage of revenue that a company retains as income after the deduction of expenses. Tesla net profit margin as of March 31, 2024 is 13%.

Automotive sales are Tesla's strongest growth driver, accounting for about 81.1 percent of revenue in 2023. Automotive sales revenue increased by around 17 percent year-on-year.

Tesla gross profit for the twelve months ending June 30, 2024 was $16.890B, a 16.4% decline year-over-year. Tesla annual gross profit for 2023 was $17.66B, a 15.31% decline from 2022. Tesla annual gross profit for 2022 was $20.853B, a 53.26% increase from 2021.

Tesla made a gross profit of $17.4 billion in 2023, giving it a gross profit margin of 18.2%. A decade after going public, it recorded its first full-year profit in 2020. The vast majority of Tesla's revenue comes from sales of its vehicles and accompanying features like full self-driving upgrades.

It's more likely that Tesla sales are sluggish because the cars haven't been revised or refreshed in years and people invest in durability, features, safety, and affordability—not a CEO's mindset. “Mr. Musk's political views could change tomorrow,” said Maas.

Tesla will see higher profit margins as it reduces unit production costs over the next several years. Tesla's full self-driving software should generate growing profits in the coming years as the technology continues to improve, leading to increased adoption by Tesla drivers and licensing from other auto manufacturers.

Consider Toyota and Tesla: the world's biggest automaker and the one most highly valued. Toyota makes twice as much money, but Tesla is valued more than 40 percent higher — almost $550 billion to Toyota's $380 billion.