In recent overnight trading on the popular platform Robinhood, shares of Tesla experienced a notable drop of up to 3%. This decline follows significant revelations that the company’s board is actively seeking a new chief executive officer to replace Elon Musk. According to a report by the Wall Street Journal, the board has engaged several executive search firms to formally initiate the process of identifying Tesla's next leader, with insights provided by sources close to the discussions.
This strategic move by Tesla's board comes in the wake of a concerning downturn in the company’s sales and profits. The first quarter results reflected a significant shortfall, with both the top and bottom lines missing analysts' expectations. This has raised alarms regarding the future trajectory of the electric vehicle giant, which has seen its reputation tarnished by Musk's extensive involvement in governmental affairs, particularly during his time working closely with former U.S. President Donald Trump to streamline federal operations.
In its recent earnings call, Musk revealed that he intends to allocate just one or two days per week to the newly established Department of Government Efficiency, starting in May. This announcement coincided with Tesla's disappointing financial results, where total revenue fell by 9% year-on-year, reaching only $19.34 billion for the January-March quarter. This figure was significantly below the analyst forecast of $21.11 billion, as reported by LSEG data.
Breaking down the performance further, revenue from Tesla's automotive segment dropped 20% compared to the previous year, totaling $14 billion. The company attributed this decline to necessary updates across its four manufacturing facilities to produce a refreshed version of its highly sought-after Model Y SUV. Additionally, lower average selling prices and increased sales incentives have adversely affected both revenue and profit margins.
Furthermore, Tesla's net income has suffered a staggering 71% decrease, plummeting to $409 million or 12 cents per share, down from $1.39 billion or 41 cents in the same quarter of the previous year. This alarming trend has contributed to a steep decline in Tesla's stock value, with shares plummeting by 30.13% since the beginning of the year.
As Tesla navigates these tumultuous times, the search for a new CEO may prove pivotal in restoring investor confidence and revitalizing the company's market position.
This report includes contributions from CNBC journalists Dan Mangan and Laura Kolodny.
