Tesla Profit Falls Even as Car Sales Rebound

Tesla reported a decline in quarterly profit Wednesday as the company sold more electric cars but made less money on each sale.

Net profit in the second quarter was $1.1 billion, Tesla said, compared with $1.2 billion a year earlier. Sales rose sharply to $28.2 billion, compared with $22.5 billion. Analysts had expected sales of $27.6 billion and profit of $1.3 billion, according to estimates compiled by the company.

Tesla also reported big jumps in operating expenses and capital expenditures as it poured money into new technologies, like self-driving taxis, that do not yet generate significant revenue. Tesla is also investing in factories to make batteries, semi trucks and other products.

Very few automakers have reported large increases in profit recently. Overall sales are growing slowly, partly because of tariffs and the war in Iran, and established manufacturers are struggling to compete with fast-growing Chinese companies like BYD and Geely Auto that are pushing into Europe, Latin America and many Asian countries.

General Motors said Tuesday that its second-quarter profit fell 30 percent from a year earlier to $1.3 billion, though the company said it had earned more per vehicle.

Tesla reported this month that car sales were stronger than analysts had expected, largely because increases in Europe more than made up for declines in the United States.

That should have been a good omen for profits. But the impact was muted because Tesla cut prices, offering cheaper versions of its Model Y and Model 3 vehicles as well as car loans at discounted rates.

Car sales account for more than 70 percent of Tesla’s revenue, but investors are more focused on the company’s efforts to develop self-driving taxis and robots with humanlike form. Tesla’s $1.2 trillion stock market value, many times the value of any other carmaker, is predicated on the success of those products.

There are signs that investors are getting impatient after Elon Musk, Tesla’s chief executive, failed to deliver on promises that its Robotaxi service would be widely deployed by now. The company has a relatively small number of taxis operating in Texas, California and Florida, and some of them still have Tesla employees or contractors at the wheel.

In California, Tesla does not have a permit to offer fully autonomous, paid rides, according to the state’s Public Utilities Commission, which regulates ride-hailing services. In Texas, Tesla is authorized to operate 69 self-driving taxis, according to the Department of Motor Vehicles.

Waymo, a division of Alphabet, Google’s parent company, offers driverless taxi service in 11 U.S. cities, including Atlanta, Houston and Los Angeles. Waymo has permits for 628 autonomous vehicles in Texas.

“The rhetoric makes it sounds like they are pioneering this business,” Michael Lenox, interim dean of the Darden School of Business at the University of Virginia, said of Tesla. “But they are way behind Waymo.”

Tesla shares have fallen 14 percent this year even as the Nasdaq Composite index has risen 11 percent.

“People are definitely bothered” by the slowness of the Robotaxi rollout, said Tom Narayan, lead autos analyst at RBC Capital Markets.

But he added that many investors wanted Tesla to proceed cautiously. If the company perfects the technology without needing major hardware upgrades, millions of Teslas already on the roads will be able to function as autonomous taxis, allowing the company to quickly overtake competitors.

“Maybe it’s a slow initial rollout,” Mr. Narayan said. “But if it’s successful, any Tesla could theoretically be a Robotaxi.”

During a conference call on Wednesday to discuss the company’s financial results, Mr. Musk acknowledged that an accident would be a serious setback to his Robotaxi ambitions. “If we injure even one person it will be worldwide headline news,” he said.

Despite questions about the safety of Tesla’s self-driving technology, the number of Tesla owners paying for its driver-assistance system increased more than 50 percent, to 1.5 million. A subscription to the software costs $99 a month in the United States.

Tesla’s financial performance has also been overshadowed by expectations that Mr. Musk will try to merge the automaker with SpaceX, the rocket company he controls, which recently completed an initial public offering.

Mr. Musk deflected a question on that topic. “We can’t talk about combining companies on an earnings call,” he said, while also mentioning that Tesla and SpaceX already collaborate in areas like artificial intelligence and satellite internet.