Tesla gains 13% in after-hours trading despite steep fall in Q1 revenue, profits: Here’s why

Shares of the electric-vehicle maker Tesla Inc jumped over 13% in after-hours trading (trading that happens post closing hours) on Wednesday despite the steepest drop in the company’s revenue in over a decade. The rise in share price followed the company’s announcement that it will accelerate its affordable model launch ahead of its planned schedule.

After-hours trading usually takes place from 4 pm to 8 pm Eastern Standard Time (ET) in the United States. Notably, trading volume remains low during this period.

Tesla’s revenue dropped 9% year-on-year (YoY) to $21.3 billion in the first quarter of 2024. Meanwhile, the company’s operating income plunged 56% to $1.17 billion during the quarter with operating margin slipping 592 basis points to 5.5%. Net income also fell 55% YoY to $1.13 billion.

The world’s largest automaker by market capitalisation attributed the drop in revenues to reduced average selling price and decline in deliveries of vehicles, partially due to the Model 3 update in the Fremont factory and Giga Berlin production disruptions.

Factors like increase in operating expenses and lower cost per vehicle, including lower raw material costs, freight and duties impacted its operating profit.

Affordable vehicles

Tesla stated during its earnings announcement that it has updated its future vehicle line-up to accelerate the launch of new models ahead of the previously communicated start of production in the second half of 2025.

These new vehicles, including more affordable models, will utilise aspects of the next generation platform as well as aspects of its current platforms, and will be able to be produced on the same manufacturing lines as its current vehicle line-up, the company said.

Tesla believes this update may result in achieving less cost reduction than previously expected but will enable the firm to prudently grow its vehicle volumes in a more capex efficient manner during uncertain times. “This would help us fully utilise our current expected maximum capacity of close to three million vehicles, enabling more than 50% growth over 2023 production before investing in new manufacturing lines,” the company said.

Tesla said it has sufficient liquidity to fund its product roadmap, long-term capacity expansion plans and other expenses.

Chief Elon Musk had recently delayed his India visit ahead of the release of the company’s first quarter results. He was expected to meet Prime Minister Narendra Modi and announce major investments in the country. However, as per a report, the company is looking to use existing factories to build affordable vehicles and advance the production. Thus, investments in new factories in India and Mexico are unlikely.

Meanwhile, the company’s volume guidance was downbeat. The auto-maker pointed out that in 2024, its vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as the company’s teams work on the launch of the next generation vehicle and other products.

Job Losses

Tesla is set to lay off 10% of its global workforce which the company believes will result in savings to the tune of $1 billion dollars.

“As we prepare the company for the next phase of growth, we had to make the hard but necessary decision to reduce our headcount by over 10%. The savings generated are expected to be well in excess of $1 billion on an annual run rate basis,” said Vaibhav Taneja, Chief Financial Officer at Tesla according to an Q1 earnings call transcript.

According to a report, the job cuts would be done in the company’s two leading markets, US and China, across divisions like sales, technology and engineering.

Shares of Tesla have fallen over 41% since the beginning of the year. The stock has lost over 11% in the last one year. The company’s current market capitalisation stands at over $453 billion.