After years of rapid growth, Tesla now faces challenges as demand for electric vehicles slows and competition intensifies.
On January 24, the American electric car company Tesla announced its revenue and profit for the fourth quarter of 2023. Both figures fell short of analysts' expectations.
Revenue rose just 3% year-on-year to $25.17 billion. Operating profit margin was 8.2%, half of what it was in the same period in 2022, though slightly higher than in the third quarter of 2023. Gross profit margin for the auto segment (excluding profits from selling emission credits) was just 17.2%, far below previous years.
Auto revenue growth slowed in part because Tesla slashed prices in the second half of last year. Net income last quarter was $7.9 billion, double what it was a year earlier. But the increase was largely due to tax deductions.
Tesla Model Y cars at a factory in Germany in March 2022. Photo: Reuters
Shares of the automaker fell 6% in after-hours trading following the news. They are down 16% year-to-date.
Tesla said sales growth this year “may slow significantly” compared to last year, as it works to launch “a new generation of vehicles.”
Tesla says it is “in the midst of two major growth waves.” One is the wave that follows the Model 3 and Model Y launches in 2017 and 2020. The other is the wave that will begin with the next-generation vehicle it is working on.
Wall Street forecasts Tesla will sell 2.2 million vehicles this year, up 21% from 2023 but below the 50% long-term target Musk set three years ago.
After years of rapid growth, Tesla is now facing shrinking profit margins due to slowing demand for electric vehicles and increased competition. "If sales decline further, I think Musk will continue to lower prices to gain market share. That will further reduce profit margins," Gary Bradshaw, portfolio manager at Hodges Capital Management, told Reuters.
Tesla’s vehicle manufacturing costs also continued to fall in the fourth quarter, as the company faces pressure to launch new, lower-cost models.
Tesla CEO Elon Musk also predicted on January 24 that Chinese automakers would have great success globally. "Without trade barriers, they would crush almost every other automaker in the world ," he said. Globally, BYD (China) sold more electric cars than Tesla in the fourth quarter of 2023.
Ha Thu (according to Reuters)
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