Tesla shares surge 13% in extended trading despite steepest revenue drop since 2012; Here’s why

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Tesla Inc., owned by billionaire Elon Musk, reported a 9% year-on-year decline in its revenue for the March quarter, its first drop since the Covid-19 quarter in 2020 and the steepest that the world’s most valued automaker has seen since 2012.

However, the stock rose over 13% in extended trading to $163.96, thereby rebounding from the lowest level in 15 months. This, after Elon Musk highlighted that the production of the new, affordable EV models could be preponed. Tesla had earlier guided for production of low cost models to begin in the second half of 2025. Musk also guided for Tesla’s sales in 2024 to be higher than that in the year gone by.

The electric vehicle manufacturer is working towards increasing production by 50% versus 2023 before it invests in new lines.

Tesla reported revenue of $21.3 billion, which was lower than the $22.15 billion projection of a survey of analysts by LSEG. The company’s profit halved from the year-ago period to $1.13 billion. Earnings per Share (EPS) on an adjusted basis stood at $0.45, also lower than expectations of $0.51.

Tesla’s revenue fell due to a decline in vehicle deliveries and the price cuts undertaken by the company, reducing the average selling price of the vehicle. Last week, the company cut the US prices of its Model Y, Model X and Model S vehicles by $2,000 each. Musk expressed confidence on the investor call that Tesla will remain cash positive despite these price cuts.

Volumes also fell sequentially due to a early phase of the Model 3 ramp-up at Fremont, factory shutdowns in Berlin and planned shutdowns in China.

Musk also spoke about the recent job cuts at Tesla, calling it necessary to reorganise the company for the next phase of growth. The layoffs will save Tesla $1 billion annually.

Tesla had reported earlier this month that its global vehicle deliveries for the March quarter fell for the first time in nearly four years, despite the price cuts.

Musk also asserted that Tesla constitutes majority of his time on a daily basis. The impending earnings prompted Musk to cancel his much-awaited India visit, also confirming a CNBC-TV18 newsbreak from Friday.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow