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February 23, 2024

Tesla Misses on Q4 Earnings Amid Price Cuts, Warns of Slower Growth in 2024

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Jan 25, 2024

Tesla released its fourth-quarter and full-year 2023 financial results on Wednesday, reporting revenue and earnings that missed analyst expectations. The electric vehicle maker also warned investors that production volume growth in 2024 will be “notably lower” than the impressive 2023 levels. Tesla stock plunged over 5% in after-hours trading following the announcement.

Q4 Financial Results Fall Short of Estimates

Tesla generated $24.3 billion in revenue in Q4 2023, missing analyst forecasts of $24.7 billion. Earnings per share came in at $1.19 on an adjusted basis, below expectations of $1.29 per share.

The results mark a slowdown from Tesla’s revenue growth rate of over 50% for much of 2022 and 2023. Production also grew at a slower pace, likely due to macroeconomic headwinds and loss of momentum following massive factory expansions.

“Our focus this year will be on increasing operational efficiency and cost reduction, rather than attempting to maximize growth,” said Tesla in its update letter to shareholders.

Metric Q4 2022 Q4 2023 Change
Revenue $24.3B $24.3B 0%
EPS (Non-GAAP) $1.05 $1.19 +13%
Free Cash Flow $2.0B $3.4B +70%
Vehicle Deliveries 405K 427K +6%

On the earnings call, Tesla CEO Elon Musk said that demand and orders remain strong despite the economic troubles, but that production expansion has slowed. Musk also reiterated warnings from October about a possible recession this year.

Vehicle Production Growth Rate to Slow in 2024

In addition to the Q4 results, Tesla also previewed expectations for 2024. The company said it expects vehicle production to grow “on the order of 40% in the next two years.”

However, Tesla warned the growth rate in 2024 is “likely to be notably lower than in 2023” as new factories shift focus to scaling Model Y production and developing Cybertruck manufacturing capacities.

This slower volume growth forecast for 2024 came as a surprise, as Wall Street was expecting Tesla’s rapid expansion to continue. The last time Tesla predicted 40% growth was in 2020, and the company went on to grow deliveries by over 80% in 2021 and 2022.

The caution likely stems from Tesla’s intense focus on costs and efficiency gains after several quarters of declining automotive gross margins. Price cuts implemented globally in January are squeezing margins further in an effort to stimulate demand.

Next Generation Vehicle Platform Teased

Beyond the financials, Tesla dropped hints about an upcoming next generation vehicle platform that will underpin future products. The company said its engineering team is “making progress” on the platform and initial manufacturing work is underway.

While no timeline was given, rumors suggest Tesla could unveil its next flagship vehicle built on this architecture sometime in 2025. The platform is expected to enable further improvements to range, performance, and cost.

Many analysts speculate the next generation vehicle will be a new crossover SUV to replace the aging Model X. However, a next generation Roadster sports car has also been rumored.

Outlook for 2023: Lower Growth But Continued Profitability

Tesla expects to grow sales volume about 37% in 2023 to 1.8 million vehicles delivered. This forecast assumes no new factories come online this year beyond the two that opened in 2022.

With price cuts weighing on margins even as costs are scrutinized, analysts see profits likely declining year-over-year. However, Tesla reiterated its goal to grow operating profit for the full year, excluding potential impacts from exchange rates and bitcoin impairment.

Beyond efficiency gains, Tesla’s outlook depends heavily on demand holding up amid the price cuts. CEO Elon Musk said that January orders were strong so far despite the economic uncertainty. Analysts will be watching order rates and delivery wait times closely in the coming months.

If the economy falls into recession, Tesla may need to resort to further price reductions or incentive programs to keep factories humming. With over 1 million vehicles of annual production capacity still ramping up, Tesla has plenty of room to flex downward as needed.

Many on Wall Street remain confident Tesla can power through any temporary troubles and continue leading the auto industry’s electrification transformation. One key report says that while risks are rising, Tesla’s long-term 2030 growth story remains intact.

As Musk said during the earnings call: “The road ahead is bumpy, but the fundamentals are good.” Investors now await Tesla’s next moves in navigating the challenging terrain.

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AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

To err is human, but AI does it too. Whilst factual data is used in the production of these articles, the content is written entirely by AI. Double check any facts you intend to rely on with another source.

By AiBot

AiBot scans breaking news and distills multiple news articles into a concise, easy-to-understand summary which reads just like a news story, saving users time while keeping them well-informed.

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