Tesla’s profits are falling, but the company promises to release a cheaper car model

(CNN) — Tesla said its first-quarter profit fell 48%, missing Wall Street forecasts, but reassured investors it plans to continue producing a cheaper model due out next year.

The company reported a 9% drop in total revenue, which also fell short of analysts’ estimates. And its profitability decreased by 2 percentage points.

However, Tesla buoyed some investors by announcing it plans to continue producing a lower-priced model that the company says will go into production in the second half of 2025.

Tesla has a history of missing new vehicle launch deadlines. But the promise that the company would still produce a cheaper model was good news following reports that the company was abandoning plans to build that car entirely.

The earnings report contained few details about plans for a lower-priced model, so the conference call scheduled for Tuesday evening will be of particular interest. Company executives may also provide more details about its plans to build a fleet of self-driving “robotaxis,” which Tesla said earlier this month and will unveil in August.

Tesla shares rose 9% in aftermarket trading on promises of a cheaper model.

Tesla has been hit by a series of bad news stories that have sent its stock price down more than 40% this year. Earlier this month, the company reported its first year-on-year drop in global sales since the pandemic and announced plans to cut more than 10% of its workforce. In addition, the company continued its year-long series of price cuts. The latest decline occurred over the weekend.

The falling share price has even some Tesla bulls worried about the future of the world’s most valuable automaker. But it faces growing competition from both established Western automakers launching their own electric vehicle offerings and Chinese automakers offering low-cost electric vehicles.

In the last three months of last year, Tesla lost the title of the world’s largest electric vehicle maker to Chinese automaker BYD.

After Reuters reported earlier this month that Tesla was abandoning plans for a cheaper model, commonly known as the Tesla Model 2, due to competition from China, CEO Elon Musk tweeted: “Reuters is lying ( again)” without revealing any details. company plans. But in January he warned that Chinese automakers could “destroy” their competitors with low-cost electric vehicles.

What Musk has to say about competition from Chinese electric vehicle makers will also be a key question for investors.

Tesla’s net income rose to $1.5 billion, or 45 cents per share. Analysts forecast earnings of 49 cents per share. It was the smallest quarterly profit Tesla has reported since the first quarter of 2021, when the pandemic and supply chain disruptions were still weighing on results.

The company also said it had negative cash flow of $2.5 billion, the first time the company lost money in a quarter since the first quarter of 2020, at the start of the pandemic.

The company said it faced numerous challenges in the first quarter, from a conflict in the Red Sea that forced ships heading from Asia to Europe to take a longer route around Africa, to an arson attack at its plant in Germany and a ramp flooding. Updated Model 3 at the Fremont, California plant.