Tesla’s first-quarter net income plummeted 55%, but its stock price surged in after-hours trading Tuesday as the company said it would accelerate production of new, more affordable vehicles.
The Austin, Texas, company said it made $1.13 billion from January through March compared with $2.51 billion in the same period a year ago.
Investors and analysts were looking for some sign that Tesla will take steops to stem its stock’s slide this year and grow sales. The company did that in a letter to investors Tuesday, saying that production of smaller, more affordable models will start ahead of previous guidance.
The smaller models, which apparently include the Model 2 small car that is expected to cost around $25,000, will use new generation vehicle underpinnings and some features of current models. The company said it would be built on the same manufacturing lines as its current products.
On a conference call with analysts, CEO Elon Musk said he expects production to start in the second half of next year “if not late this year.”
New factories or massive new production lines won’t be needed for the new vehicles, he said.
“This update may result in achieving less cost reduction than previously expected but enables us to prudently grow our vehicle volumes in a more capex efficient manner during uncertain times,” the investor letter said.
The company also appears to be counting on a vehicle built to be a fully autonomous robotaxi as the catalyst for future earnings growth. CEO Elon Musk has said the robotaxi will be unveiled on Aug. 8.
Tesla repeated in the letter that it is between two major growth waves, the first one starting with sales of the Models 3 and Y. The company believes the second wave will come from “advances in autonomy and introduction of new products, including those built on our next generation vehicle platform.”
Shares of Tesla rose over 11% in trading after Tuesday’s closing bell, but they are down more than 40% this year. The S&P 500 index is up about 5%.
Tesla reported that first-quarter revenue was $21.3 billion, down 9% from last year as worldwide sales dropped nearly 9% due to increased competition and slowing demand for electric vehicles. Tesla also blamed an arson attack at its German plant and factory downtime as it switched factories to an updated version of the Model 3 sedan.
Excluding one-time items such as stock-based compensation, Tesla made 45 cents per share, falling short of analyst estimates of 49 cents, according to FactSet.
The company’s gross profit margin, the percentage of revenue it gets to keep after expenses, fell once again to 17.4%. A year ago it was 19.3%, and it peaked at 29.1% in the first quarter of 2022.