Tesla Shares Surge Despite Profit Drop as Musk Unveils New Vehicle Plans

Tesla reported a 24% drop in first-quarter profits to $2.5 billion, but the company's shares rose sharply as CEO Elon Musk announced plans to accelerate the launch of new, more affordable electric vehicle models. The electric carmaker said it is updating its future vehicle lineup to bring forward the introduction of lower-priced options that will utilize aspects of Tesla's next-generation platform as well as current production lines.

Despite the decline in profits compared to the previous year, investors reacted positively to Musk's surprise revelation that Tesla is fast-tracking its affordable EV program. The new models aim to reach an ambitious target of 3 million units in annual sales. "We are fully committed to an affordable electric vehicle and achieving the 50% reduction in cost of manufacturing," Musk said during the earnings call.

Tesla confirmed that production of its long-awaited Cybertruck has ramped up to 1,000 units per week, with plans to reach an annual rate of 250,000 units. The company also highlighted record profitability for its energy storage business in Q1, particularly with the Megapack battery system, despite industry-wide challenges and pressure on overall EV adoption.

Why this matters: Tesla's accelerated plans for more affordable EVs and the positive investor response signal a shift in the company's strategy to maintain its leading position in an increasingly competitive electric vehicle market. The move could help Tesla tap into a wider customer base and drive mainstream adoption of electric cars.

Musk expressed confidence in Tesla's autonomous driving progress, noting the rollout of the Full Self-Driving (FSD) Beta version 12 to around 1.8 million vehicles. He also teased the unveiling of a purpose-built robotaxi called "Cybercab" in August. However, some analysts remain skeptical about the timeline and feasibility of Tesla's ambitious autonomous driving goals.

Tesla's first-quarter results showed the impact of recent price cuts, with automotive gross margins dipping to 17.4% from 19.3% a year ago. Revenue fell 9% year-over-year to $21.3 billion, while earnings per share of $0.45 missed analyst expectations. The company attributed the challenges to increased competition and slowing demand for electric vehicles.

Looking ahead, Musk predicted that Tesla's vehicle deliveries in 2024 would be higher than the 1.8 million units sold last year. The CEO also emphasized Tesla's significant investments in artificial intelligence, with the company installing 35,000 active H100 computers for AI training and aiming to reach around 85,000 by the end of 2023. "Tesla should be viewed as an AI or robotics company, not just an automotive company," Musk said, signaling a shift in the company's long-term ambitions.

Key Takeaways

• Tesla Q1 profits down 24% to $2.5B, but stock rose on affordable EV plans
• Tesla accelerating launch of lower-priced EVs, aims for 3M annual sales
• Cybertruck production ramped up to 1,000 units/week, energy storage business thrived
• Tesla confident in autonomous driving progress, teases robotaxi unveiling in Aug
• Tesla views itself as an AI/robotics company, not just an automaker