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Tesla earnings plunge even more than forecast

A Tesla Model Y is seen on a Tesla car lot on May 31, 2023 in Austin, Texas. (Brandon Bell/Getty Images)

NEW YORK (CNN) — Tesla reported its first quarter adjusted earnings plunged 48%, falling short of lowered Wall Street forecasts, but it assured investors that it plans to move ahead with a cheaper model due out next year.

The company reported a 9% drop in total revenue, which also missed analyst estimates. And its profit margin declined by 2 percentage points.

But Tesla heartened some investors by announcing it plans to move ahead with a lower priced model, which it said will go into production in the second half of 2025.

Tesla has a history of not living up to timelines on vehicle launches. But the promise that it is still moving ahead with a lower-priced model was assuring news in the wake of reports that it would drop plans for the vehicle altogether.

The earnings release had few details about plans for a cheaper model, so a conference call set for later Tuesday evening will be of particular interest. Company executives also could give more details about its plans for a fleet of driverless “robotaxis” that Tesla said earlier this month that it will unveil in August.

Shares of Tesla rose 9% in after-market trading on the promise of a cheaper model.

Tesla has been battered by a series of bad news that has driven down the value of its shares more than 40% so far this year. Earlier this month, it reported its first year-over-year decline in global sales since the pandemic and unveiled plans to cut more than 10% of its staff. It also continued its year-long series of price cuts, with the most recent coming last weekend.

The drop in stock value has even some Tesla bulls worried about the future for the world’s most valuable automaker. But it is facing increasing competition from both established Western automakers — which are rolling out their own EV offerings — and Chinese automakers, which are offering low-priced EVs.

In the final three months of last year, Tesla lost its title as the world’s largest EV maker to Chinese automaker BYD.

After Reuters reported earlier this month that Tesla was dropping plans for a cheaper model, popularly referred to as the Tesla Model 2, because of competition from China, CEO Elon Musk tweeted “Reuters is lying (again),” without giving any details of the company’s plans. But in January, he did warn that Chinese automakers could ‘demolish’ rivals with low priced EVs.

What Musk might say about the competition from Chinese EV makers today will also be a key focus for investors.

Tesla adjusted net income came in at $1.5 billion, or 45 cents a share. Analysts had been forecasting earnings per share of 49 cents. It was the smallest adjusted quarterly profit that Tesla had reported since the first quarter of 2021, when the pandemic and supply chain disruptions were still affecting results.

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

The company said it experienced numerous challenges in the first quarter, from the conflict in the Red Sea, which caused ships heading from Asia to Europe to take a longer path around Africa, to an arson attack at its plant in Germany and a gradual ramp up of the updated Model 3 at its plant in Fremont, California.