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Tesla (TSLA) is driving in reverse today after missing EPS expectations for the fourth consecutive quarter as the EV maker's price cuts continue to chip away at its margins and earnings. Although TSLA reported better-than-expected Q2 deliveries of 443,956 on July 2, deliveries were still down by 5% yr/yr, despite the company's aggressive price cutting strategy. With demand for TSLA's vehicles losing some of their charge, partly due to rising competition in China, the focal point has turned to the company's next wave of growth catalysts. Unfortunately for TSLA shareholders, the company had some disappointing news to share in that regard, too.

• Specifically, CEO Elon Musk confirmed earlier reports that TSLA won't unveil its robotaxi until October after initially setting August as its target. Of course, pushing back launch timelines is nothing new for TSLA -- the company initially planned to produce Cybertruck in 2021 -- but given its vanishing growth rates, there's a greater sense of urgency among investors for these future growth drivers to unfold.
• Speaking of TSLA's vanishing growth, its EPS plunged by 43% yr/yr to $0.52 as automotive gross margin continued its downward trajectory, sliding by 180 bps yr/yr to 14.6%. For some perspective, TSLA automotive gross margin in 2Q22 was 27.9% on a GAAP basis.
  • Musk has been willing to sacrifice margins for volume growth since he believes that the company's future success rests on deploying software, like full self-driving technology, to an expanding fleet of vehicles.
  • Until software becomes a much larger contributor to TSLA's revenue, or until TSLA's market share losses abate, this strategy will continue to weigh on its margins.
• One bright spot was the Energy Generation and Storage business, which saw revenue double yr/yr to $3.0 bln on record energy storage deployment of 9.4 GWh. The strong growth in this business allowed TSLA to avoid posting back-to-back quarterly revenue declines for the first time ever as total revenue edged higher by 2.3% to $25.5 bln.
  • Additionally, TSLA registered $890 mln in sales of regulatory credits to other automakers, which help its competitors to meet emissions requirements.
• These are small wins, though, that don't erase the overarching concern that TSLA is losing ground to Chinese competitors such as BYD Company (BYDDY), NIO (NIO), Li Auto (LI), and XPeng (XPEV). Adding to those concerns, TSLA acknowledged that its vehicle growth rate in 2024 may be notably lower than the 38% delivery growth achieved in 2023.

The company did reaffirm its expectation to begin production on its new mass market Model 2 vehicle in 1H25, while also reiterating that it plans to ramp up investments in AI initiatives, but the road looks bumpy over the next few quarters. Further complicating matters is the upcoming presidential election in November, which caused Musk to pause plans on constructing a new factory in Mexico due to Donald Trump's vow to implement tariffs on products made in Mexico should he win the election.