23 April 2025
If you are covering Tesla’s Q1 results, please find comments below from Mamta Valechha consumer discretionary analyst at Quilter Cheviot:
“Tesla’s Q1 results were unsurprisingly weak, with total revenues down 9%, primarily driven by a 20% decline in the automotive division. Earnings (EBIT) margin of 2.1% is the lowest since Tesla approached break-even in 2019. Free cash flow dipped to $660 million, but did not enter negative territory as capital expenditures were nearly halved compared to the prior year due to reduced investments.
“Tesla has effectively removed its growth guidance for this year, no longer promising a return to growth in 2025, and stated that it will revisit guidance in Q2. Additionally, Tesla warned that the energy business will be more affected by tariffs than the automotive sector, given that cells are sourced from China.
“On a positive note, the Robotaxi launch is still expected in June in Austin, and production for more affordable models is anticipated in the first half of the year. However, it is important to note that these models will resemble the form or shape of current models, as they are partially built on existing platforms. This effectively means a lower-cost trim that could cannibalise existing higher-priced trims. Tesla also promised a Cybercab in 2026.
“As always with Tesla, the focus tends to shift from the numbers to what Elon Musk says on the call. Yesterday, the disappointing results were somewhat mitigated by Musk indicating that his time allocation to DOGE will drop significantly, which provided some sentiment relief for the stock, leading to a 5% increase after hours.
“Musk tried to steer investors to focus beyond the near-term challenges to Tesla’s AI future, including large-scale autonomous cars and humanoid robots. While Tesla is making progress on these initiatives, we believe the market and management commentary are overly optimistic about the timing. The narrative around Tesla’s stock and valuation remains heavily dependent on these future prospects.”
