Tesla Hopes New Models Can Shore Up A 55 Percent Drop In Profits

Good morning! It’s Wednesday, April 24, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

The Hype Behind Tesla Stock Success In 2023

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1st Gear: Tesla Profits Drop 55 Percent

Tesla doesn’t seem to be able to catch a break right now. Whether it’s falling registrations as sales drop, or bodged recalls of its flagship models, the electric vehicle maker is certainly having a time of it right now. This reached a head late last night, when the company revealed that its profits were down an eye-watering 55 percent due to falling sales and lower costs for its cars.

Last night, Tesla revealed that it took in $21.3 billion in revenue during the first quarter of 2024, reports the Guardian. That income marked a nine percent drop over the same period last year, and the company’s profits from the quarter hit $1.1 billion—55 percent lower than the same period in 2024.

Despite the kinds of revenue cuts that would have most bosses fearing for their jobs, Tesla weirdly saw its share price surge following the investors call last night. That’s because the company outlined its ambitions to turn things around, which includes a renewed focus on artificial intelligence, autonomy and maybe even an affordable EV. As the Guardian explains:

Still, the report offered heartening announcements for investors, including previews of a ride-hailing app to be integrated into Tesla products. The company said it expected to release new vehicle models sooner than previously announced and referenced a robotaxi network in the works.

It has more than doubled its AI compute – the complexity of its smart software – in the past three months and invested $1bn on AI infrastructure during the same time period.

News of a more affordable Tesla was highlighted by the Verge, which said that the company planned to “introduce new and more affordable products.” A more budget-friendly Tesla would be part of the company’s next-generation lineup, which will use a new EV platform that shares some similarities to the company’s current platform, reports the Verge.

Many had feared that the affordable Tesla had been canned mere weeks ago, but the mention of it in last night’s earnings call was enough to calm investors and saw the company’s share price end the day up to $144 per share, up from the $140 they were valued at Monday.

2nd Gear: Layoffs Continue At Tesla

That small rise in share price wasn’t enough to secure the future of Tesla, though, and the company will plow ahead with plans to slash its workforce around the world, with jobs set to go in Texas and California.

After the EV maker cut its entire marketing team yesterday, Tesla confirmed that it plans to cut 2,700 jobs in Austin and more than 3,300 in California, reports CNBC. The cuts are part of a massive restructuring effort at Tesla that will see it trim its headcount by as much as 20 percent. As CNBC explains:

Musk said in an internal memo last week that Tesla was cutting more than 10% of its global headcount as the EV maker reckons with flagging sales and increased competition. He did not say which departments or locations would be most affected.

“As we prepare the company for our next phase of growth, it is extremely important to look at every aspect of the company for cost reductions and increasing productivity,” he wrote. A subsequent WARN notice filed in New York indicated that 285 positions were being eliminated at a factory in Buffalo.

As of December 2023, Tesla employed more than 140,000 people around the world, reports CNBC. If Tesla plans to follow through with a 20 percent cut of its workforce that means as many as 28,000 people will be out of work at its facilities across the globe.

As well as the job cuts here in the U.S., Automotive News Europe also reports that cuts are on the horizon at Tesla’s plant in Germany. The site reports that as many as 400 jobs could be on the chopping block there.

3rd Gear: Boeing Crash Victims Want Justice

Speaking of companies having a rough time right now, let’s check in on American plane manufacturer Boeing, which has been hit with numerous high profile mechanical failures in recent months. Now, the Seattle-based company is facing a legal challenge from the families of victims killed in two high-profile crashes.

Families of people killed in Boeing 737 MAX crashes in 2018 and 2019 are pressuring the U.S. Justice Department to criminally prosecute the planemaker, reports Reuiters. The push for prosecution comes as the 737 Max lineup continues to be hit with quality issues, which saw a side panel blow off a plane while it was at altitude earlier this year.

Now, relatives of those killed in the two crashes and their lawyers are expected to argue that Boeing violated a deal to overhaul its compliance program following the 737 Max crashes, which killed 346 people. As Reuters explains:

Federal prosecutors agreed to ask a judge to dismiss a criminal charge against Boeing so long as it complied with the deal’s terms over a three-year period.

But a panel blew off a new Boeing 737 MAX 9 jet during a Jan. 5 Alaska Airlines flight, just two days before the 2021 agreement expired. Justice Department officials are now weighing that incident as part of a broader probe into whether Boeing violated the deal, known as a deferred prosecution agreement, or DPA, two people familiar with the matter told Reuters.

“What we’re saying to DOJ is, throw out the DPA,” said Nadia Milleron, whose daughter, Samya Stumo, died while traveling aboard the Ethiopian Airlines Boeing 737 MAX 8 that crashed in March 2019. “We want them to think to themselves: This is too much. There has to be accountability.”

Family members are calling for an independent monitor of production practices at Boeing. This, they say, is the only way to ensure that the plane maker is complying with safety and quality measures put in place in the 2021 agreement.

4th Gear: Polestar Losses Hit Volvo’s Earnings

It’s not all bad news today, though, as it turns out that plucky Swedish automaker Volvo is just plodding along quietly, loving life and doing just fine. The wagon-pedaling automaker just posted earnings of $434.78 million, which came in spite of losses at its EV-making offshoot, Polestar.

Earnings of more than $400 million in the first three months of 2024 marked a slight dip for Volvo, but Automotive News reports that this was due to “lower revenue and losses at its Polestar business.” as the site explains:

This was below a consensus referenced by JPMorgan, which had expected operating income of 5.93 billion crowns.

However, its adjusted operating income, which excludes joint ventures, associates and one-offs, rose 8 percent to 6.8 billion Swedish crowns ($629.27 million).

“Overall, a good start to the year where Volvo reported double-digit sales growth and continued to ramp up production of the EX30,” JPMorgan said, referring to unit sales.

The strong demand Volvo is seeing for its cars is projected to continue through 2024 as the new EX30 EV begins shipping in even more global markets. This car, company boos Jim Rowan says, will be one important factor in Volvo’s growth targets for the year.

According to Rowan, the company is on track to hit its 15 percent growth target for 2024, which he said would be aided by high electric vehicle margins.