Tesla sales surged in the final three months of 2023 as the automaker cut prices and customers rushed to take advantage of tax breaks on electric vehicles — provisions that will be harder to come by in 2024.
The company said Tuesday it sold 484,500 cars in the fourth quarter, up from 435,000 in the third quarter and 405,000 in the fourth quarter of 2022. For the full year, Tesla sold 1.8 million vehicles. The earnings put Tesla on track to sell more than two million cars by 2024, potentially surpassing established automakers such as Mercedes-Benz and Renault.
A rebound in sales in the fourth quarter will help ease investor concerns about whether Tesla can defend its dominance of the electric vehicle market as it faces increased competition from traditional automakers.
Over the past year, Tesla has lost market share to rivals such as General Motors, Hyundai, Ford Motor and Volkswagen as they introduced more electric vehicles. Tesla accounts for half of the electric cars sold in the United States. In 2022, Tesla accounted for two-thirds of the market.
Another electric vehicle maker, Rivian, said on Tuesday it sold nearly 14,000 vehicles in the last three months of the year. That number was up significantly from a year earlier, but down about 10 percent from the third quarter.
In China, the largest market for electric cars, Tesla faces stiff competition from BYD and other Chinese automakers. BYD sold 526,000 fully electric cars worldwide in the fourth quarter, surpassing Tesla, a milestone many auto analysts had expected given the Chinese company’s rapid growth.
Chinese automakers have moved faster to offer a wide range of affordable electric models as the market has expanded beyond affluent early adopters of the technology. They are the core customers who have bought Teslas for as long as the company has existed.
“Customers buying EVs now are second-hand users, who have fundamentally different needs,” said Shay Natarajan, a partner at Mobility Impact Partners, a private equity fund focused on investing in sustainable transportation. “They care about tangible and immediately realizable reductions in total cost of ownership, and they care about convenience.”
In Europe, Volkswagen and its Audi and Skoda divisions sell more electric vehicles than Tesla, although the Tesla Model Y is by far the best-selling model on the continent, according to data compiled by Schmidt Automotive Research.
In the United States, those interested in buying an electric car had a strong incentive to take delivery before the end of the year due to new rules aimed at cutting China out of the supply chain.
Tesla had warned on its website that the two cheapest versions of the Model 3 sedan would not qualify for $7,500 in federal tax credits after Dec. 31. The cars have batteries made in China. Germany and some other European countries have also withdrawn subsidies for buyers of electric vehicles.
To maintain sales, Tesla has slashed prices, offering the Model 3 on its website for well under $30,000 after factoring in tax credits. By the end of December, the number of lower-priced cars listed on the site appeared to have decreased, suggesting the strategy had worked. However, the price cuts weighed on Tesla’s profits, which fell 44% in the third quarter from a year earlier.
Tesla said it will report earnings for the fourth quarter of 2023 on January 24.
While fewer Teslas will qualify for federal tax credits in 2024, the company is in a better position than most of its competitors. The Performance version of the Model 3, which includes upgraded wheels and brakes, will remain eligible for the subsidy, as will all versions of the Model Y sport utility vehicle, according to a federal government website. Tesla manufactures batteries for these cars at a Nevada plant it works with Panasonic, allowing it to meet domestic manufacturing requirements.
That gives Tesla a significant advantage over rivals like Ford, which has said its Mustang Mach-E sport utility vehicle will not qualify for the credit in the new year.
Ford and others rely on manufacturers in China for critical components. Ford is building battery plants in the United States, but they won’t start production until 2025.
General Motors was making batteries at a new plant in Ohio, but it had trouble running the plant at full capacity. Initially only the Chevrolet Bolt will qualify for tax credits, GM said in December. The Cadillac Lyriq and electric Chevrolet Blazer will no longer be eligible.
GM said it is adjusting its supply chain so that these and other vehicles, including electric versions of the Chevrolet Silverado pickup and Equinox sport utility vehicle, will be eligible early this year.
Tesla and other automakers may also benefit from lower interest rates in the new year. Investors are betting that the Federal Reserve and other central banks will start cutting interest rates as inflation falls.
