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Tesla Net Income Drops More Than 20% From Last Year

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  • Tesla's Q1 2023 revenue and profit came in very close to expectations, based on a survey of analysts from Refinitiv.
  • Tesla specified in a shareholder deck that "underutilization of new factories" stressed margins, along with higher raw material, commodity, logistics and warranty costs, and lower revenue from environmental credits, all contributing to the drop in earnings from last year.

Shares in electric vehicle maker Tesla dropped more than 4% after the company reported first-quarter earnings after the bell Wednesday. Here are the results.

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  • Earnings per share: 85 cents adjusted vs 85 cents expected, according to the average analyst estimate compiled by Refinitiv
  • Revenue: $23.33 billion vs $23.21 billion expected, according to Refinitiv estimates

Tesla said net income fell 24% to $2.51 billion, or 73 cents a share, from $3.32 billion, or 95 cents a share, a year ago.

The company specified in a shareholder deck that "underutilization of new factories" stressed margins, along with higher raw material, commodity, logistics and warranty costs, and lower revenue from environmental credits, all contributing to the drop in earnings from last year.

Automotive revenue, Tesla's core segment, reached $19.96 billion in the quarter, up 18% from last year. Total revenue rose 24%. Revenue from automotive regulatory credits during the first three months of 2023 amounted to $521 million, down from $679 million in the first quarter of last year.

On an earnings call, CEO Elon Musk emphasized an "uncertain" macroeconomic environment that could impact people's car-shopping plans. During a question-and-answer session with analysts, Musk said he expected 12 months of "stormy weather" in the economy. He cautioned that, "Every time that the Fed raises interest rates, that's the equivalent to an increase in the price of a car." He also said, whenever there's uncertainty in the economy, people will generally postpone "big new capital purchases like a new car."

He said, "We've taken a view that pushing for higher volumes and a larger fleet is the right choice here, versus a lower volume and higher margin," but noted he expects Tesla vehicles "over time will be able to generate significant profit through autonomy."

When Tesla began to discuss its ambitions in self-driving technology in 2016, Musk said the company would conduct a hands-free trip across the U.S. by late 2017. It has yet to complete that mission.

Tesla Energy revenue soared to $1.53 billion, up 148% compared with the same period last year. Tesla's energy storage systems deployment increased to 3.9 gigawatt-hours, or by 360%, the company said. These lithium-ion battery-based energy storage systems, made by Tesla, include the home backup battery, called the Powerwall, and the utility-scale Megapack system which enables utilities to store and use more energy generated from renewable, but intermittent, sources like solar and wind. 

Tesla's first-quarter earnings call was livestreamed via Twitter, a first for the electric vehicle maker. CEO Musk sold billions of dollars worth of his Tesla holdings in 2022 to finance a $44 billion buyout of the social media company, where he is now also CEO.

The company cut prices on its vehicles at the end of last year and into the first quarter of 2023, including additional reductions Tuesday night. At the same time, Tesla is charting ambitious plans for expansion and increased capital expenditures.

Tesla currently sells four EV models, which are produced at two vehicle assembly plants in the U.S., one in Shanghai and another outside Berlin.

Shareholders who submitted questions ahead of the earnings call for management's consideration were seeking updates on the company's trapezoidal, sci-fi inspired Cybertruck, the company's energy division and the timing for a new model vehicle from Tesla.

On the call, Musk said Tesla is now building "alpha versions of the Cybertruck" on a pilot line. The company intends to produce the Cybertruck at its Austin, Texas, factory. Musk said he anticipates an event to kick off Cybertruck deliveries in the third quarter of 2023.

In 2023, Tesla expects to produce 1.8 million vehicles, Musk reiterated, or possibly an "upside" volume of 2 million vehicles this year.

In early April, Tesla reported vehicle deliveries of 422,875 vehicles in the first quarter, the closest approximation of sales disclosed by the company. Production was slightly higher than deliveries for the first three months of 2023 at 440,808 vehicles.

A month earlier, Musk announced plans to build a Tesla factory in Monterrey, Mexico, a day's drive from a relatively new factory in Austin. And more recently, Tesla said it plans to set up a factory to make Megapacks, or large lithium-ion battery-based energy storage systems, in Shanghai.

According to a financial filing published in late January, Tesla expected to spend between $7 billion and $9 billion in 2024 and 2025, an increase in capital expenditures of about $1 billion in the next two years.

Tesla shares have rebounded this year from a dismal 2022, when they lost about two-thirds of their value alongside a plunge in tech companies. The stock is up 48% in 2023.

Correction: Tesla reported GAAP earnings of 73 cents per share. An earlier version mischaracterized the result.

WATCH: CFRA's Garrett Nelson bullish on long-term earnings growth for Tesla

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