Tesla’s first-quarter net income plummeted 55%, but its stock price surged in after-hours trading on Tuesday as the company said it would move up production of new, more affordable vehicles.

The Austin, Texas, company said it made 1.13 billion dollars (£0.91 billion) from January through to March compared with 2.51 billion dollars (£2.02 billion) in the same period a year ago.

Revenue was 21.3 billion dollars (£17.1 billion), down 9% from last year as worldwide sales dropped nearly 9% thanks to increased competition and slowing demand for electric vehicles.

Tesla also blamed an arson attack at its German plant and factory downtime as it switched factories to an updated version of the Model 3 sedan.

Excluding one-time items such as stock-based compensation, Tesla made 45 cents per share, falling short of analyst estimates of 49 cents, according to FactSet.

The company’s gross profit margin, the percentage of revenue it gets to keep after expenses, fell once again to 17.4%. A year ago it was 19.3%, and it peaked at 29.1% in the first quarter of 2022.

Tesla said in a letter to investors on Tuesday that its vehicle sales growth “may be notably lower” than last year as it works on the launch of its next generation vehicle and unidentified other products.

The next generation vehicle apparently is the small Model 2, which is expected to cost around 25,000 dollars (£20,000) and give Tesla more appeal to mass-market buyers. It was not clear whether the company would continue to pursue that car.

The company also appears to be counting on a vehicle built to be a fully autonomous robotaxi as the catalyst for future earnings growth. Chief executive Elon Musk has said the robotaxi will be unveiled on August 8.

Shares of Tesla rose 5.2% in trading after Tuesday’s closing bell, but they are down more than 40% this year. The S&P 500 index is up about 5%.

Investors and analysts will be looking for more specific answers from Mr Musk on an earnings conference call later on Tuesday. Many analysts say the sales decline raises questions about demand for Teslas and other electric vehicles.

Mr Musk has been touting the robotaxi as a growth catalyst for Tesla since the hardware for it went on sale late in 2015. He has called the system “Full Self Driving”, even though the company says on its website that it cannot drive itself and humans must be ready to take control at all times.

In 2019, Mr Musk promised a fleet of autonomous robotaxis by 2020 that would bring income to Tesla owners and make their car values appreciate. Instead, they have declined with price cuts, as the autonomous robotaxis have been delayed year after year while being tested by owners as the company gathers road data for its computers.

Industry analysts are sceptical, and feared that Mr Musk has cancelled or delayed plans for the Model 2.

Over the weekend, Tesla cut the price of the Models Y, S and X in the US and reportedly made cuts in other countries including China.

In a note to investors on Monday, Bank of America Global Research analyst John Murphy wrote that Tesla’s shares have been under pressure since the start of the year due to weaker EV sales, and production that exceeds demand.

“We retain some level of skepticism on Tesla’s growth prospects, but also see opportunities as the company will unveil future growth drivers (robotaxi and Model 2) in the coming months,” Mr Murphy wrote, adding that he maintains a neutral rating on the stock.

On Sunday, Mr Musk wrote on X, the social media platform he owns, that like other automakers, Tesla prices change frequently “in order to match production with demand”.

From January through to March, Tesla manufactured 433,371 vehicles and delivered 386,810, making over 46,000 more than it sold. This even after it cut prices last year on some of its more expensive models by up to 20,000 dollars (£16,000).

Last week, Tesla announced it would cut 10% of its 140,000 employees, and key executive Andrew Baglino, senior vice president of powertrain and energy engineering, announced he was leaving after 18 years.

The company also announced that it would ask shareholders to restore a 56 billion-dollar (£45 billion) pay package for Mr Musk that was rejected by a Delaware court.

Mr Murphy wrote that on Tuesday, he expects Mr Musk and the company to give some hints about the robotaxi, and also could reiterate an intent to start making the Model 2 in 2025 or 2026.

Early last year the National Highway Traffic Safety Administration made Tesla recall its “Full Self-Driving” system because it can misbehave around intersections and does not always follow speed limits.

Tesla’s less-sophisticated Autopilot system also was recalled to bolster its driver monitoring system.

Some experts, though, do not think any system that relies solely on cameras like Tesla’s can ever reach full autonomy.