Tesla reports 45% profit drop as AI costs rise and vehicle prices fall

Tesla (TSLA) said its second-quarter profit fell 45% from a year earlier as development costs for artificial intelligence (AI) projects rose and the average selling price of its vehicles fell.

The profit decline came despite a 2 percent year-on-year increase in revenue to $25.5 billion, above the $24.98 billion analysts were expecting, according to Visible Alpha estimates.

A lower average selling price and lower deliveries than the company reported for the second quarter of 2023 weighed on the electric vehicle giant’s profitability, which posted a profit of $1.48 billion, down from $2.7 billion a year earlier and missing estimates.

Tesla focuses on cost cutting, robotaxi development and cheaper models

Tesla has said it has several key areas it wants to focus on in the future, including lowering the average cost of a vehicle, as well as developing projects in the AI ​​space such as robotaxi and humanoid robots, which CEO Elon Musk recently said would be “low-volume” and operating in Tesla factories by next year. The company also said its plans to begin production of a “more affordable” vehicle by the first half of 2025 remain on track.

Investors will be watching the company’s earnings press conference on Tuesday to see if Tesla will provide a new date for the debut of its robot taxi, after Musk said last week that the event had been postponed from its original Aug. 8 date.

“While the timing of Robotaxi’s launch is subject to technological advancements and regulatory approvals, we are working aggressively on this opportunity given its enormous potential,” the company said in its earnings release.

Tesla shares fell 4.4% to $235.49 in extended trading at 5:10 p.m. ET on Tuesday following the data release, after falling 2% throughout the trading session.