CMB Securities: Tesla Q2 performance falls short of expectations, automotive gross margin under pressure

According to the information from Zhitong Finance APP, CMB Securities released a research report stating that Tesla (TSLA.US) announced its Q2 2024 performance, with profits falling below expectations due to $620 million in restructuring costs, expected to be a one-time impact from layoffs. The market underestimates the impact of layoffs. Excluding the impact of points, revenue slightly exceeded expectations, but gross margin fell short of expectations, with a 13.9% gross margin on car sales, lower than previously feared. A gross margin of less than 14% may limit Tesla's ability to further reduce prices. It is recommended to follow the progress of FSD V12.5 and Robotaxi.

Tesla's Q2 2024 performance falls short of market expectations; Non-GAAP net profit of $1.81 billion, -42.4%/-18.0% QoQ/YoY, with pressure on automotive gross margin.

Financials:

1. Revenue of $25.5 billion, +2.3%/+19.7% QoQ/YoY, 3.9% higher than market expectations ($24.54 billion); automotive business revenue of $19.88 billion, -6.5%/+14.4% QoQ/YoY; energy business revenue of $3.01 billion, +99.7%/+84.3% QoQ/YoY; points revenue of $890 million, +215.6%/+101.4% QoQ/YoY, with significant fluctuations.

2. Non-GAAP net profit of $1.81 billion, -42.4%/+18.0% QoQ/YoY, 15.2% lower than market expectations ($2.14 billion). GAAP net profit of $1.49 billion, -42.8%/+30.6% QoQ/YoY.

3. Gross margin of 18.0%, -0.2%/+0.6% QoQ/YoY, 0.6% higher than market expectations (17.4%), benefiting from points and energy business; automotive gross margin of 13.9%, -3.7%/-1.7% QoQ/YoY, below expectations; energy business gross margin of 24.6%, +6.1%/-0.1% QoQ/YoY, in line with expectations.

4. Revenue per vehicle of $41,700, - $815 QoQ; gross profit per vehicle of $5,800, - $842 QoQ; Non-GAAP net profit per vehicle of $4,100, + $111 QoQ.

5. R&D expense rate of 4.2%, +0.4%/-1.2% QoQ/YoY; SG&A expense rate of 5.0%, +0.2%/-1.4% QoQ/YoY.

6. Free cash flow of $1.34 billion, turning positive.

Deliveries:

Q2 deliveries of 444,000 vehicles exceeded expectations, -4.8%/+14.8% YoY/QoQ, with inventory clearance factors estimated.

Key Points of Performance:

Not many surprises. Launch of a low-priced model in H1 2025; Robotaxi launched on October 10; first-generation robot products to be produced on a small scale in 2025 and sold overseas in 2026; construction of the Mexican factory is currently on hold Comments:

1. Profit fell short of expectations, including $620 million in restructuring costs, expected to be a one-time impact. The market underestimated the impact of layoffs.

2. Excluding the impact of credits, revenue slightly exceeded expectations, but gross margin fell short of expectations, with a 13.9% gross margin on car sales, lower than our previous concerns. A gross margin below 14% may limit Tesla's ability to further reduce prices.

3. It is recommended to monitor the progress of FSD V12.5 and Robotaxi.

Final Thoughts:

1. We observed that market expectations may have been too high, and we highlighted risks in our forward-looking reports and roadshows.

2. Very similar to: On June 13th, Musk announced approval of his compensation, causing the stock price to jump; subsequently, the market (including us) expected Musk to surprise at the shareholders' meeting, but the expectations were too high and the result was disappointing; on July 2nd, Q2 deliveries exceeded expectations, leading to high market performance expectations, resulting in disappointment again. Musk's pace is not easily influenced by external factors, while market expectations fluctuate greatly.

3. We continue to maintain the judgment that the stock price will fluctuate downward in the short term, but the downside space will not be too large (market value of $800-700 billion). Currently down 7.7% after hours.

Risk Warning: Declining profitability; deteriorating competitive landscape; Cybertruck deliveries falling short of expectations