Tesla earnings are today. Here’s what you should know

Tesla (TSLA) is expected to report its results for the July-September quarter on Wednesday, giving Wall Street a new chance to question CEO Elon Musk about his plans.

The Austin, Texas-based company faces a number of challenges, namely its plans to largely transform itself into a company focused on artificial intelligence and robotics.

Investors are looking for details about how Tesla plans to boost sales of its popular but aging electric vehicles while advancing its AI and robotics technology and trying to win over regulators. They are also interested in Tesla products currently in development, such as the Tesla Roadster.

Here’s what you need to know ahead of Tesla’s third-quarter earnings report.

Expect the cybercab to dominate

Tesla delivered its first product demonstration on Oct. 10 for the Cybercab, a planned autonomous vehicle that will eventually be part of the automaker’s planned robotaxis network. But other than what we can see of the vehicle – its “butterfly doors”, lack of steering wheel or pedals, two seats and a large trunk – not much is known about it or the Robotaxi network.

Analysts will expect Musk to provide some more granular details than he did at the launch event titled “We, Robot.” These likely include Tesla’s estimated production costs, market size, regulatory approval timeline, and other boring – but necessary – details left out of Musk’s spectacle.

“Unlike most investor events these days, this was more like a show followed by a big party,” analysts at Deutsche Bank (DB) said after the event, adding: “We were generally disappointed by the lack of disclosure of details and.” short length of the Cybercab demo ride.”

Many valuations of Tesla’s current and future stock price take into account a planned robotaxi network. But such a network, which Musk described as a “combination of Airbnb and Uber (UBER),” is not expected in the next few years. At the event, Musk appeared to encourage people — particularly current Uber and Lyft (LYFT) drivers, who are often not very wealthy — to buy multiple cybercabs.

It’s unclear whether Tesla would allow its cybercabs to be used on non-Tesla networks like Uber’s, or how profits would be split between a network operator and the car owner. Either way, analysts at JP Morgan (JPM) say, switching from a Tesla-operated robotaxi network to selling these vehicles would not be a welcome prospect.

Tesla expects to eventually sell the Cybercab to consumers for less than $30,000, but Musk says it won’t go into production “until 2027.” It’s unclear whether Tesla is working on a $25,000 electric car, which has reportedly been scrapped or shelved in favor of the Cybercab but is still on analysts’ wish list.

Earlier this month, Tesla also unveiled its Optimus humanoid robots and unveiled a planned autonomous vehicle capable of carrying 20 passengers, the Robovan. Investors are looking for details on these products, as well as an update on the fate of Musk’s $25,000 vehicle, the Tesla Semi, and his long-awaited – and delayed – Roadster sports car.

The next-generation Roadster was introduced in 2017 and was due to return to market in 2021, before repeated delays. Musk had previously said a prototype for the next-generation model should be unveiled by the end of this year, with production starting in 2025, but updates have been scant.

A regulatory dilemma

Earlier this month, Musk laid out an optimistic timeline for making Tesla’s vehicles fully autonomous.

“We assume that we can start completely autonomously and unsupervised [Full Self-Driving mode] next year in Texas and California,” Musk said at the Oct. 10 event, where about 30 Model Y cars drove autonomously on the limited testing grounds of Warner Bros. Discovery’s (WBD) Hollywood lot.

Tesla’s other vehicles – the Model S, Model However, given Tesla’s numerous regulatory concerns and lawsuits, such a possibility is unclear.

Federal regulators launched a new investigation into Tesla’s technology on Friday after one of its full self-driving vehicles fatally struck a pedestrian. The National Highway Traffic Safety Administration has opened at least five investigations into Tesla.

And although Tesla has announced that it will introduce FSD in China in the first quarter of 2025, the rollout is expected to be delayed, CNEVPOST reports, citing Beijing-based newspaper China Daily.

How are sales going?

Tesla has sold more than 1.29 million electric vehicles so far in 2024. That’s no small amount of cars. But it doesn’t give the company much room to reach 1.8 million sales by year-end. 1.81 million units were sold in 2023.

To achieve this goal, Tesla must sell more than 516,000 vehicles between October and December. The company achieved its best quarterly performance to date in the third quarter of 2023, when it delivered more than 484,000 units to customers.

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Analysts currently expect fourth-quarter deliveries of 472,000 vehicles, according to a handful of estimates from FactSet (FDS). This would bring the total number of deliveries to 1.76 million, a decrease of 2%. According to 18 analysts surveyed by LSEG, deliveries could fall short by almost 0.3%.

Wall Street will also be keeping an eye on Tesla’s gross margins as the carmaker has cut prices to boost demand. In China, Tesla has introduced a number of incentives, such as low-cost financing options, to boost demand in the competitive market.

Analysts expect Tesla to post a gross margin of 14.7% in the July-September quarter, compared with 16.3% a year ago and 14.6% in the second quarter of 2024. Wall Street wants margins closer to 2025 to get closer to 20% to renew their confidence, according to Wedbush Securities analyst Dan Ives.

“We need to start by getting this key metric in the 3rd/4th. Quarter will move into the high teens to provide reassurance to the public. “Many of the price cuts are in the rearview mirror, suggesting better margin days ahead in 2025,” Ives wrote on Monday.

According to Kelly Blue Book, the average Tesla sold for $58,212 last month, although those numbers are heavily skewed by the Cybertruck, an expensive electric pickup. Cybertruck sales are expected to decline in the coming months as Tesla’s backlog of reservation holders appears to be largely holding back purchases of the pricey vehicle.

According to FactSet, earnings per share are expected to reach 60 cents, down from 66 cents a year ago but up from 52 cents last quarter. Revenue is expected to reach $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the previous quarter.

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