The end of the car selling story? Tesla enters the AI and new energy era | Jianzhi Research

On the morning of July 24th, the new energy vehicle giant Tesla released its second-quarter 2024 performance.

In the second quarter of this year, although Tesla's car sales did not show significant growth, they were better than market expectations. Coupled with a doubling of income from selling carbon emission credit quotas, Tesla's car business revenue and gross profit margin were barely maintained.

Looking at the medium to long term, Tesla's future aces in the car business - FSD and Robotaxi are expected to see catalysts in the second half of the year; in the short term, Tesla's energy business has already started to contribute to profits, with growth levels in operating income, gross profit margin, and energy storage product deployment exceeding expectations.

2024 Q2, Tesla achieved operating revenue of $25.5 billion, a year-on-year increase of 2.3%, higher than the market's expected $24.63 billion; net profit was $1.813 billion, a year-on-year decrease of 42%; gross profit margin decreased by 0.2 percentage points year-on-year to 18%.

1. Sales growth remains weak, but the production-sales gap has reversed

In the second quarter of this year, Tesla reduced its frequency of price promotions in China. Only after the launch of the Xiaomi SU7, a price reduction of 14,000 yuan was made across all models, bringing the starting price of the Model 3 below the Xiaomi SU7 Pro (231,900 yuan). In place of this, Tesla introduced a limited-time 0 down payment or 0 interest purchase plan for the Model 3 and Model Y.

Following direct price reductions, insurance subsidies, and service package subsidies, Tesla's new strategy - 0 down payment and 0 interest, still had a certain promotional effect. Although Tesla's sales did not achieve a positive year-on-year growth rate, the month-on-month decline finally stopped, performing better than expected.

In the second quarter, Tesla's production was 411,000 vehicles, a year-on-year decrease of 14.5% and a quarter-on-quarter decrease of 5.2%; deliveries were 444,000 vehicles, better than the market's expected 439,300 vehicles, a year-on-year decrease of 4.8%, but a quarter-on-quarter increase of 14.8%.

Since the first quarter of last year, Tesla's production has been consistently higher than sales, leading to a historical high inventory in the first quarter of this year (4,700 more vehicles produced than sold).

In the second quarter, Tesla clearly controlled the production pace, with both production and deliveries decreasing year-on-year and quarter-on-quarter, resulting in deliveries exceeding production, and inventory no longer accumulating (inventory turnover days for the quarter decreased from 28 days in the first quarter to 18 days in this quarter).

Of course, this is not a long-term solution. Previously, during the high growth phase of Tesla's sales, the limiting factor for delivery volume was capacity rather than demand. Now, the need to control production levels indicates that Tesla has foreseen the weak sales growth.

It is worth noting that in the first half of this year, Tesla's global sales were only 831,000 vehicles. Not only did its market share in China drop below 10% to 6.8%, but its market share in the United States also fell below 50% for the first time in the second quarter to 49.7% (compared to 59.3% in the same period last year).

Even if calculated based on the annual target of 1.8 million vehicles, Tesla needs to achieve an average quarterly sales volume of 484,500 vehicles in the second half of the year. This sales level is at a historical high and is not an easy task.

2. The profitability and revenue of the automotive business are barely holding steady, relying on three major aces in the future

In the second quarter of this year, although Tesla's promotional strategy has changed somewhat, the fundamental nature of price reduction has not changed, and the dilemma of continuous decline in Tesla's per vehicle revenue has not improved as a result.

In the second quarter, Tesla's per vehicle revenue was $42,700, a decrease of $3,300 year-on-year and a decrease of $2,200 quarter-on-quarter. Fortunately, the income from selling carbon emission credits remained strong, reaching a new high of 890 million yuan in the second quarter, doubling year-on-year, to some extent offsetting the poor performance of car sales.

In the end, Tesla's automotive business revenue reached 19.9 billion yuan, basically in line with market expectations of 19.7 billion yuan; however, the automotive gross profit margin, in the context of price reductions and zero down payment promotions, paid the price to stabilize sales, still decreased by 1.7 percentage points quarter-on-quarter to 14.6%.

It is worth noting that Musk stated during the conference call that Robotaxi will hold an official launch event on October 10th, which will provide a major increment for Tesla's future automotive business.

(1) Tesla's FSD is expected to enter China rapidly, which will significantly increase its value

Musk directly stated this time that the FSD system will enter multiple countries including China and Europe in version 12.5 (the parameter volume will be 5 times that of the previous version, greatly improving robustness) or version 12.6, and is expected to obtain regulatory approval from China and the EU by the end of the year.

Previously, Tesla had stated that due to insufficient training in regular scenarios, the FSD version 12.4 lacked smoothness in daily driving, leading to a delayed release and failure to be pushed out as scheduled in July.

During the first-quarter conference call, Tesla stated that after the release of the V12 supervisory version, there was a significant increase in FSD-related revenue (contributing around 1.7 percentage points to the automotive gross profit margin), and this was only in use in a few regions such as North America.

If FSD can enter more markets as planned, the related revenue will bring new growth.

(2) Tesla's Robotaxi has great potential

Another key focus of the market is Tesla's Robotaxi, which is set to launch in October this year.

In the U.S. domestic market, Tesla's autonomous taxi business faces few competitors, mainly Waymo, Cruise, and Amazon Zoox Tesla is fully capable of winning a significant share of the US domestic market with its advanced autonomous driving technology, outstanding car products, excellent brand effect, and high recognition among consumers.

3. Highly anticipated robots and AI are also developing rapidly

In addition to its automotive business, Tesla's highly anticipated robot Optimus and AI have received good news.

Musk stated during a conference call that Optimus the robot is expected to start trial production early next year, with the humanoid robot Optimus set to be officially put into use by the end of this year. Initially, thousands of robots will undertake certain production tasks at Tesla's factories, and with the increase in production efficiency, the second production version of Optimus will also provide sales channels for external customers.

Furthermore, despite a continued decrease in capital expenditures to 22.7 billion yuan in the second quarter, down 0.4 billion yuan year-on-year and 5 billion yuan quarter-on-quarter, infrastructure spending related to AI computing power has increased by around 6 billion yuan in the second quarter. It is worth noting that Musk stated during the conference call that the overall capital expenditure for this year will exceed 10 billion yuan, with the main expenditure going towards AI, as Tesla plans to increase and launch a 50K GPU cluster and expand FSD while enhancing AI capabilities.

4. Tesla's energy business is thriving, becoming a major source of short-term growth

Tesla's energy business is thriving.

(1) Doubling of energy storage deployment

Specifically, in terms of energy storage deployment, Tesla deployed 9.4GWh of energy storage products in the second quarter, a significant increase of 157% year-on-year and 129% quarter-on-quarter, setting a new historical high (with a deployment of 13.5GWh in the first half of the year already close to last year's annual level). In early July, Tesla once again announced a cooperation agreement with Intersect Power, signing a 15.3GWh energy storage order, breaking Tesla's single contract record in the energy storage field.

(2) Doubling of energy storage capacity

In terms of energy storage capacity, Tesla's Lathrop energy storage factory in California will complete the construction of new production lines this year, doubling its capacity from 20GWh to 40GWh; the energy storage super factory in Shanghai is also expected to start production in the first quarter of next year, with a capacity of up to 40GWh. The increase in Tesla's energy storage capacity fully matches the growth rate of deployment, providing momentum for the continuous growth of Tesla's energy business.

(3) Significant increase in energy storage business gross margin, revenue share exceeding 10% for the first time

In terms of profitability, in the second quarter of this year, Tesla's energy business revenue reached $3.01 billion, a 100% year-on-year increase, exceeding Tesla's previous guidance of 75% year-on-year growth.

The proportion of Tesla's energy business revenue to total revenue has climbed from 4.8% in 2022 to 12% in the second quarter of 2024; the gross margin is as high as 25%, far exceeding the 14.6% of the automotive business It can be seen that Tesla's energy storage business is rapidly converting the rapid growth in product sales into revenue and profit growth.

It is worth noting that the delivery date of Tesla's Megapack product has been postponed to mid-2025. It has entered a phase of rapid growth, and the only thing that can limit the sales of Tesla's energy storage products in the short term is production capacity.

Tesla's pure car sales business, even with the continuous price reduction strategy, is unlikely to make progress in the short term. In the future, we can only hope that Tesla will be able to turn the tide with the rise of FSD, Robotaxi, and energy business