Tesla’s profit from electric car sales fell in the final three months of last year due to price cuts aimed at fending off increasingly fierce competition, the company said on Wednesday, warning of a tough year ahead.
Fourth-quarter earnings nearly doubled to $7.9 billion, from $3.7 billion a year earlier. But $5.9 billion of those gains came from a tax benefit. Without this one-off accounting effect, profit would have declined.
Tesla cut prices for the two cars that make up the bulk of its sales – the Model 3 sedan and the Model Y sport utility vehicle – as automakers such as China’s BYD and General Motors, Hyundai, Ford Motor and Volkswagen, in the United States and Europe, have begun selling more electric vehicles.
The price cuts helped Tesla sell more cars and forced other automakers to respond, helping to make electric vehicles more affordable. But the cuts have weighed on Tesla’s profits. In 2022, Tesla was one of the world’s most profitable automakers, but its margins on vehicle sales have fallen by nearly a third in the past year and are now comparable to those of other major rivals.
Because of the price cuts, revenue from auto sales last quarter rose just 1 percent from a year earlier to $21.6 billion — even though Tesla sold 1.8 million cars in 2023, up 35 percent from in 2022. Tesla made up some of the difference by cutting production costs.
Tesla shares fell about 6 percent in after-hours trading after the company said it expected sales growth to be “notably slower” in 2024 as it developed an affordable vehicle. Elon Musk, Tesla’s chief executive, said during a conference call on Wednesday that the vehicle, whose design remains secret, could be available by the end of 2025.
“This will be a challenge,” he warned, because of the new technology being developed to build the car at a lower cost.
At Wednesday’s close, Tesla stock was 17 percent below where it started the year and down more than 25 percent from July’s 12-month high.
The automaker faces a number of challenges this year, including economic uncertainty in all its major markets and questions about Mr. Musk’s future role. He surprised investors this month when he told X, the social networking site he owns, that he wanted Tesla’s board to increase his stake in the company to 25%, from 13%, effectively giving him more than $80 billion worth of stock .
If he doesn’t get his wish, Mr. Musk said, he will develop new AI products “outside of Tesla.” Tesla’s board has not responded publicly.
Mr Musk said on Wednesday he needed 25 per cent to protect him from being kicked out “of some sort of random shareholder advisory firm’. He added, “There are a lot of activists who actually infiltrate these organizations and have, you know, weird ideas about what should be done.”
Mr. Musk did not specify how Tesla’s board could grant him a stake worth $80 billion without diluting the value of Tesla’s stock.
The automaker has more than half the electric vehicle market in the United States and has more models than any other manufacturer that qualify for $7,500 in tax credits under rules that took effect Jan. 1. Falling prices for lithium, cobalt and other materials necessary for battery production will help lower manufacturing costs.
Tesla has begun selling the Cybertruck, a pickup that is the company’s first new model since the Model Y in 2020. However, Tesla remains dependent on the Model 3 and Model Y for sales. BYD and Volkswagen, along with the Audi, Porsche and Skoda brands, offer a wider selection of vehicles.
Tesla said on Wednesday that the cost of ramping up production of the Cybertruck had weighed on profits and that it would take longer than usual to produce the vehicle in high volumes because of a complicated manufacturing process. The truck’s body is made of stainless steel, which resists rust and is more durable than the steel used in most cars, but is also more difficult to shape and weld.
Slowing sales growth for electric vehicles is another challenge. Surveys show that many people are interested in electric vehicles but hesitate to buy because of high prices and concern about finding enough places to charge the cars.
In a setback, Hertz said this month it would sell some of its fleet of Teslas because they were less profitable than expected and because some customers struggled with the unfamiliar technology.
Election-year politics add another element of uncertainty for all EV makers. Former President Donald J. Trump, the Republican front-runner, has called electric vehicles a farce and his supporters have vowed to roll back the Biden administration’s policies aimed at promoting cars and encouraging domestic manufacturing.
Senator John Barrasso, a Wyoming Republican who has supported Mr Trump, recently portrayed electric vehicles as a subsidy for wealthy liberals at the expense of “working families in my state”.