Tesla Stock Plummets Following Sharp Drop in Quarterly Profit

Tesla’s stock took a significant hit on Wednesday, plummeting 12% after the company reported a dramatic drop in second-quarter profits. The electric vehicle (EV) giant faced a more than 40% decrease in profit compared to the same period last year, as competition in the EV market intensified and overall sales growth slowed.

This decline marks a stark shift for Tesla, which had risen to become the world’s most valuable automaker on the back of booming sales and robust profitability. The latest figures highlight the growing challenges Tesla faces from established automakers entering the EV market and a general slowdown in the growth of consumer interest in electric vehicles.

The disappointing earnings report saw Tesla’s shares fall sharply, affecting the broader market. As of Tuesday’s close, Tesla’s stock had declined about 1% for the year, after having fallen as much as 44% earlier in the year.

Tesla’s adjusted income for the quarter was reported at $1.8 billion, or 52 cents per share, falling short of analysts’ expectations of 61 cents per share. This was a notable decline from the 91 cents per share earned a year earlier. The company’s profit margins were also significantly impacted by a series of price cuts on its EVs.

This quarter marked Tesla’s second consecutive quarter of year-over-year sales declines, a first in the company’s history. The only previous sales decline occurred early in the pandemic when factory shutdowns were mandated.

Tesla did not provide a new sales target for the full year but cautioned that vehicle volume growth in 2024 might be significantly lower than in 2023. CEO Elon Musk expressed optimism about achieving ambitious sales targets but acknowledged his past predictions had been overly optimistic.

Additionally, Tesla is under federal investigation regarding some of Musk’s claims about Full Self Driving capabilities and has previously faced a Department of Justice inquiry, although the current status of that investigation is unclear.

Musk also announced a pause on Tesla’s plans to build an assembly plant in Mexico. The decision comes in response to a potential threat from Republican presidential nominee Donald Trump to impose tariffs on vehicles imported from Mexico. Musk, a strong Trump supporter, has postponed the plans until after the presidential election