U.S.-based electric vehicle (EV) maker Tesla reported a total revenue of $ 21.3 billion in the first quarter (Q1) of the financial year (FY) 2024, a 9% year-over-year (YoY) decrease. The decline in revenue was primarily attributed to a lower average selling price and a drop in vehicle deliveries, partly influenced by updates to the Model 3 at the Fremont factory and production disruptions at Giga Berlin.

The revenue from the automotive segment stood at $17.38 billion, down 13% YoY. However, the energy generation and storage segment revenue was up 7% YoY at $1.64 billion.

The company reported a net income of $1.13 billion in Q1 FY 2024, a 55% YoY decrease. The decline was driven by the reduced vehicle average selling price and heightened operating expenses, which stemmed from investments in artificial intelligence, battery cell technology advancements, and other research and development initiatives.

However, some of these financial pressures were alleviated by reduced costs per vehicle, including lower expenses for raw materials, freight, and duties, along with an increase in gross profit in the energy generation and storage segment—boosted by the Inflation Reduction Act credits.

Electric Vehicles

Vehicle production decreased by 2% YoY to 433,371 in Q1 2024. Production also decreased sequentially from 494,989 vehicles.

The vehicle deliveries for the January-March quarter decreased by 9% YoY to 386,810.

Model 3 production at Tesla’s Fremont facility saw a sequential decrease as the company updated its production line to accommodate the new model. Conversely, Model Y production at Gigafactory Texas reached record levels, with the cost of goods sold (COGS) per unit dropping to an unprecedented low. The ramp-up of Cybertruck production at the same location also saw cost improvements in Q1, with over 1,000 units produced in a single week of April.

At Gigafactory Shanghai, production dipped sequentially due to seasonal factors and planned shutdowns during the Chinese New Year in Q1. However, demand is expected to pick up throughout the year. As Tesla expands into new markets like Chile, Gigafactory Shanghai will serve as a crucial supply base.

In Berlin, Model Y production was affected sequentially by the ongoing Red Sea conflict and an arson attack at the factory. The COGS per unit decreased sequentially despite these challenges, including idle capacity charges and other disruption-related costs.

“There was, as we all have seen, the EV adoption rate globally is under pressure and a lot of other auto manufacturers are pulling back on EVs and pursuing plug-in hybrids instead. We believe this is not the right strategy, and electric vehicles will ultimately dominate the market,” said Elon Musk, Tesla’s CEO.

Energy Storage

Energy storage deployments increased sequentially in Q1 to a record 4.1 GWh. Energy Generation and Storage revenue and gross profit also achieved an all-time high in Q1. Revenues were up 7% YoY, and gross profit was up 140% YoY, driven by increased megapack deployments, partially offset by a decrease in solar deployments.

Energy generation and storage remains Tesla’s highest-margin business. The company’s second general assembly line is now commissioned, and it continues to ramp our 40 GWh Megafactory in Lathrop, California, toward full capacity.

“Our Energy business continues to make meaningful progress, with margins reaching a record of 24.6%. We expect the energy storage deployments for 2024 to grow at least 75% higher from 2023. And accordingly, this business will begin contributing significantly to our overall profitability. Note that there is a bit of lumpiness in our storage deployments due to various factors that are outside our control so deployments may fluctuate quarter-over-quarter,” said Vaibhav Taneja, Chief Financial Officer of Tesla.

Tesla reported a total net income of $10.8 billion in 2023, reflecting a 23% decrease compared to the previous year.