Tesla’s profit fell unexpectedly in the second quarter as the group led by Elon Musk offered discounts to boost sales of electric vehicles and revenue from the sale of regulatory certificates to rival companies fell sharply, the FT writes. The surprising profit decline came even as Tesla benefited from a rebound in demand for electric vehicles in Europe, where customers, faced with higher fuel prices, have moved past Musk’s polarizing political activism and returned to showrooms. In the United States, however, sales remained weak after the Trump administration scrapped incentives for electric vehicles, forcing the company to sell its cars at lower prices. You may also be interested: The Texas-based group reported adjusted net profit, which excludes stock compensation and changes in the value of cryptocurrency holdings, down 17% to $1.2 billion, well below Wall Street’s consensus estimate of $1.95 billion, calculated by Visible Alpha. Tesla shares fell more than 2% in after-hours trading. Tesla on Wednesday also reported its first quarter with negative cash flow in two years, as Musk accelerates the group’s transition from electric vehicles to semiconductors, self-driving taxis and humanoid robots. The company posted negative free cash flow of $1.1 billion, even after delivering a second-quarter record 480,126 vehicles as capital spending more than doubled. The electric carmaker’s first net cash burn since the start of 2024 came despite solid sales that drove revenue up 26% to $28.2 billion. The company suffered a sharp decline in sales last year after Musk’s highly visible role in cutting US government spending under the Trump administration alienated some consumers. Although sales have increased this year, disappointing margins reported Wednesday by the company’s auto division suggested the advance was driven in part by aggressive price cuts and financing offers. The company’s total operating margin fell to 1.4%, from 4.1% a year ago. In April, Musk raised Tesla’s investment plans for 2026 to more than $25 billion, nearly three times the $8.5 billion invested last year, citing the tech giant’s huge investment programs in artificial intelligence. Capital expenditures increased by 142% compared to the previous year, up to 5.79 billion dollars in the analyzed quarter. Tesla has ramped up spending as it begins construction on a chip research center, part of Terafab’s joint venture with SpaceX, and invests in advanced semiconductors and power grid infrastructure needed for its Cortex 2 supercomputer cluster.
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