Tesla's second-quarter earnings may continue to decline due to slowing sales, but the company's developments in robotaxis and energy storage may become a focal point of market valuation.
advertisementTesla is scheduled to announce its second-quarter results after the close of U.S. markets on July 23. Shares of the world's largest electric vehicle (EV) manufacturer have fallen 4% year-to-date but have surged 71% since it announced its first-quarter results in April. Vehicle sales are expected to continue to slow, but energy storage adoption surged in the first quarter. In addition, investors are hoping for positive developments from Tesla's AI-powered Full Self-Driving (FSD), robotaxis, and Optimus robot services.
Predictions and challenges
Tesla's second-quarter revenue is likely to decline compared to the same period a year ago, marking its third consecutive year of year-over-year declines, according to a Bloomberg survey. Total revenue is expected to be $24.6 billion, down 1% from a year ago. Earnings per share are expected to be $0.62, down 32% from a year ago.
Tesla delivered 443,956 EVs in the second quarter, beating the average Wall Street estimate of 439,302. However, the figure was down 4.8% year over year, following an 8.5% decline in the first quarter. This consecutive decline marks the longest streak of declines in quarterly deliveries since 2012. Due to growth bottlenecks, Tesla has brought forward mass production of its affordable EVs from the second half to the first half of 2025.
Among the main challenges facing Tesla is fierce competition from fast-growing Chinese EV manufacturers, especially best-selling Chinese brand BYD. The price war between these automakers caused Tesla's operating margin to fall sharply in the first quarter to 5.5% from 11.4% in the same period last year. China is Tesla's second-largest market, accounting for more than 20% of its sales. According to the China Passenger Car Association (PCA), deliveries from Tesla's Shanghai factory fell 24.2% year-on-year in June, the fourth decline this year.
The EU's increased tariffs on Chinese-made EV exports are also weighing on Tesla's sales in Europe. According to PCA data, exports of Chinese-made Tesla EVs to the EU fell to their lowest level since the third quarter of 2022. The EU is the largest export market for Chinese-made Tesla EVs, with a European market share of 9.1% in January, according to EV-volumes.com.
New growth business
Tesla needs to attract investors in new growth areas to maintain its high market valuation. CEO Elon Musk has signaled that its energy storage business is accelerating, with the division's revenue growing 7% to a record $1.64 billion in the first quarter and energy delivery reaching a record 4.1 GWh. Musk expects the division to continue to grow.
Moreover, robotaxis are part of Tesla's broader strategy to develop fully autonomous vehicles with FSD. Cathie Wood of Ark Investment Management said the autonomous taxi ecosystem is an “$8 trillion to $10 trillion global revenue opportunity” and that Tesla could capture half of the market share. She believes that an autonomous taxi platform could increase Tesla's market value tenfold. However, Tesla delayed the launch of robotaxis by about two months to October, which caused its stock price to fall in mid-July.
Tesla's AI training capacity has nearly doubled quarter-over-quarter, hitting an all-time high. At the annual shareholder meeting, Musk expressed confidence that the company's Optimus humanoid robots will be working in factories by the end of 2024. Musk believes Optimus can boost Tesla's market capitalization to $25 trillion, but he didn't say when that would happen. He also predicted that weekly production of the Cybertruck would reach 1,300 vehicles.
