Tesla driving strategy Sales through price cuts combined with the cost of bringing the Cybertruck into production weighed on profits in the fourth quarter, according to earnings reported Wednesday.
While the company has been able to continue expanding sales, reaching a record delivery of 1.8 million electric vehicles in 2023, this has not translated into the same growth in profits, or even revenues. Even as Tesla’s deliveries have grown, its profits have narrowed largely due to price cuts aimed at increasing sales and increasing costs related to future products.
Even more so, Tesla Warnings on Q4 and annual earnings release It is currently “between two major waves of growth.” While the Model Y and Model 3 have been more successful for the company over the past few years, Tesla says its car sales growth “may be significantly lower” in 2024 as it prepares to launch a new auto platform on which it plans to build a smaller electric vehicle that will cost about $25,000. dollar.
Shares fell 3.6% to $201.70 in after-market trading following the earnings report.
Tesla reported net income (on a GAAP basis) of $7.9 billion in the fourth quarter, an unusually large number that includes a one-time non-cash tax benefit of $5.9 billion for the release of a valuation allowance on certain deferred tax assets.
A company’s operating income and profits on an adjusted basis provides a clearer picture of its financial performance.
Tesla reported operating income of $2.1 billion in the fourth quarter, down 47% from the same period last year. Those results were negatively impacted by increased operating expenses driven largely by artificial intelligence and other R&D projects, the cost of the Cybertruck’s production ramp and lower revenues from its so-called full self-driving program, according to Tesla. Tesla spent $1.1 billion on research and development in the fourth quarter, a 35% increase over the same period last year.
On the upside, Tesla said it benefited from lower costs per vehicle, including raw material costs, the Inflation Reducing Act credit and growth in vehicle deliveries — all of which helped reduce the profit gap.
On an adjusted basis, the company generated $3.9 billion, down 27% from the same period last year.
Tesla was able to claw back some of its automaker-leading margins in the fourth quarter, thanks in part to a push to cut costs further.
The company’s automotive gross margins, excluding regulatory credits, were 17.2%. This is the first quarterly increase since Tesla began cutting prices significantly last year. But Tesla also said in the report that it has reached the “natural limit” of how much it can reduce costs of existing vehicles. “[O]“Currently, we expect our hardware earnings to be accompanied by acceleration in AI, software, and fleet-based earnings,” the company wrote.
Revenues have continued to grow, albeit at a slower pace than Tesla has enjoyed in the past.
The company said it generated revenue of $25.17 billion in the fourth quarter, an increase of 3% from the same quarter last year. The results barely exceeded analysts’ expectations. Analysts had expected the company to achieve revenues of about $25.62 billion in the fourth quarter of 2023, according to Yahoo financials.
This story develops…