April 21, 2024
Tesla's 4Q Earnings

Tesla’s 4Q Earnings Fall Short of Expectations as Lower Sales Growth is Forecasted

Tesla, the electric vehicle, solar panel, and battery manufacturer based in Austin, Texas, has reported that its net income more than doubled in the fourth quarter of last year, largely due to a significant one-time tax benefit. However, the company has warned of notably lower sales growth for the coming year.

In the period from October to December, Tesla’s net income reached $7.93 billion, compared to $3.69 billion in the same period the previous year. However, when excluding one-time items such as a $5.9 billion non-cash tax benefit, Tesla’s actual earnings were $2.49 billion, or 71 cents per share. This represents a 39% decrease from the previous year and falls short of analyst estimates of 73 cents per share according to FactSet.

Chief Financial Officer Vaibhav Taneja explained that the change in asset valuation would result in higher taxes for the company. Tesla’s quarterly revenue reached $25.17 billion, a 3% increase from the previous year, but still lower than analyst estimates of $25.64 billion.

One of the key factors contributing to the decrease in profits was Tesla’s decision to lower prices globally throughout the year in order to stimulate sales and increase market share. The company reported a nearly 20% rise in fourth-quarter sales, driven by significant price cuts in the U.S. and worldwide, with some cuts amounting to $20,000 on higher-priced models.

Following the release of the earnings report, Tesla’s stock fell by 6% in after-hours trading on Wednesday. Year-to-date, Tesla shares have declined approximately 16%.

Furthermore, Tesla’s sales growth rate in the fourth quarter was slower than in previous quarters. For the full year, the company’s sales rose by 37.7%, falling short of CEO Elon Musk’s prediction of 50% growth. Tesla reported delivering 484,507 vehicles in the quarter and approximately 1.8 million vehicles for the full year.

In the company’s letter to shareholders, Tesla expressed caution regarding its sales growth forecast for the current year, stating that it may be notably lower than in 2023. This is attributed to the company’s focus on launching a more affordable next-generation vehicle at its factory in Austin.

According to the letter, Tesla finds itself between two major growth waves: one driven by the global expansion of its Models 3 and Y, and another expected to come from the upcoming vehicle. During a conference call with analysts, Musk announced that the production of the new vehicle is anticipated to begin in late 2025. Innovative manufacturing techniques will require engineers to be living on the assembly line, he added.

After the launch in Austin, Tesla plans to manufacture the new vehicles at a newly constructed plant in Mexico. Analyst Seth Goldstein from Morningstar Research commented on Tesla’s results, noting that while there are predictions of slowed growth in the near term, the next-generation vehicle offers the potential for a growing customer base. However, Goldstein also stated that production of the new vehicle is unlikely to start until late next year at the earliest and estimated that it would be priced below $30,000 when it reaches Tesla stores.

During the conference call, Musk was asked about his recent comments on Twitter regarding growing Tesla into an artificial intelligence and robotics leader without owning 25% of the company shares. While some shareholders may be concerned, Musk did not provide further clarification on the matter.

1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraaged AI tools to mine information and compile it