By Rebecca Elliott
Tesla warned of slower growth in 2024 without sharing a specific target, signaling more uncertainty ahead for the world’s most valuable automaker.
The company reported fourth quarter net income more than doubled year-over-year to $7.9 billion, largely due to a one-time tax benefit. However, its income from operations was down 47% and its quarterly revenue came in shy of analysts’ expectations.
“Our company is currently between two major growth waves,” Tesla said Wednesday, cautioning that growth “may be notably lower” than it was last year, when Tesla increased annual vehicle deliveries 38%.
The company’s more subdued forecast is a sharp reversal from a couple of years ago, when demand seemed limitless and profitability was robust. Now, the electric-vehicle company is confronting softening demand, shrinking margins and intensifying competition from rival electric-vehicle makers.
Tesla’s once industry-leading operating margin improved slightly quarter-over-quarter to 8.2% for the final three months of the year. That figure was 16% in the fourth quarter of 2022.
Tesla’s valuation has long been underpinned by its sales momentum and Elon Musk’s promises to transform the carmaker into a leader in robotics and artificial intelligence. But last week, the CEO stunned Wall Street by offering what amounted to an ultimatum: He wrote on X that unless he controls around 25% of Tesla, he would prefer to build products elsewhere.
Musk currently owns 13% of the company, making him the largest shareholder, and his stake could reach nearly 21% if he exercised his vested stock options.
His comments followed Hertz’s disclosure that it was selling off about one-third of its EV fleet and news that BYD had overtaken Tesla in the fourth quarter to become the world’s top seller of EVs for the first time.
Meanwhile, Tesla initiated new price cuts in China and Europe this month and said it planned to suspend nearly all production in Germany for two weeks beginning in late January because of parts shortages caused by the conflict in the Red Sea. Tesla makes its Model Y crossover outside of Berlin.
On Monday, Morgan Stanley cut its price target for Tesla to $345 per share, from $380, citing factors including expectations of lower growth and slimmer profit margins.
“There is continually growing evidence that the global EV market is in an unfavorable balance of supply (growing) vs. demand (slowing),” analyst Adam Jonas, a longtime Tesla enthusiast, wrote in a note to investors.
The gathering headwinds fall against the backdrop of waning enthusiasm for EVs. Rival automakers are delaying investments, and executives are striking a more cautious tone about the level of consumer demand.
Buyers are also expressing reservations about going fully electric. High prices for EVs and concerns about charging and range continue to weigh on purchase decisions.
Hertz said it planned to sell about 20,000 EVs after confronting expensive repair costs and disappointing resale values on its fleet of battery-powered vehicles. The move was a reversal for a company that bet big on the technology. Hertz’s commitment in 2021 to purchase 100,000 Tesla EVs helped send the electric-car maker’s valuation above $1 trillion for the first time.
To juice sales, Tesla last year enacted a series of price cuts that took a toll on profit margins.
While the car company aims to halve production costs for its next generation of vehicles, it faces cost pressures in the near term.
Musk warned in October that the Cybertruck pickup — the company’s first new passenger model in more than three years — would be challenging to produce at higher volumes and likely wouldn’t generate significant cash flow for a year to 18 months.
Write to Rebecca Elliott at firstname.lastname@example.org