Unlock Editor’s Digest for free
Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
Tesla shares fell 12% in New York on Thursday after warning that sales growth would be “significantly weaker” this year due to slowing demand, intensifying competition and persistent rates. high interest rates which mitigated the effect of a series of price reductions.
The U.S. electric car maker told investors in an earnings report released after the stock market closed Wednesday that it was “between two major waves of growth.”
Chief Executive Elon Musk said the company was preparing to start production of a new, lower-cost car in the second half of 2025, five years after first discussions to do so, which would use “revolutionary manufacturing technology » which would reduce the cost of the car. the model.
Tesla said in its letter to shareholders that “in 2024, the growth rate of our vehicle volume could be significantly lower than the growth rate achieved in 2023, as our teams work to launch the next generation vehicle” in its Texas factory.
After years of rapid growth, Tesla’s latest results reflect concerns about slowing global demand for electric vehicles and that the world’s most valuable automaker has entered a new era of sales and margin growth weaker.
“We don’t have a crystal ball, so it’s hard to predict accurately,” Musk said on a call with investors and analysts. “If interest rates fall quickly, margins will be good and if they don’t, they won’t be so good.”
Tesla shares have fallen 26.5 percent this year. The stock doubled in 2023.
Tesla reported slower revenue growth and a declining gross margin for the three months ended at the end of December. Revenue rose 3% to $25.2 billion, marking its slowest pace of growth in more than three years and below analysts’ expectations of $25.6 billion, according to the earnings report. results published Wednesday.
Tesla said it had met its goal of delivering 1.8 million cars in 2023 but, unlike in recent years, did not offer a specific delivery target for 2024. Wall Street predicted Tesla would sell about 2.2 million of vehicles in 2024, which would mark an increase. by around 20 percent – far lower than the 50 percent annual growth rate it committed to three years ago.
Sales of electric vehicles continued to grow at record levels globally, but at slower-than-expected rates as mass-market customers balked at higher prices than gasoline alternatives . A number of electric vehicle makers have recently scaled back their expansion plans, including Ford and General Motors, while rental group Hertz is selling a third of its electric fleet to buy more gasoline vehicles.
At the same time, competition is intensifying. China’s BYD overtook Tesla as the world’s largest electric vehicle maker in the fourth quarter of 2023, delivering 1.58 million fully electric cars. Last year, Tesla was forced to reverse price increases it had made in 2022, instead cutting prices on its most expensive models.
A record 1.2 million electric vehicles were sold in the United States in 2023, according to data from Kelley Blue Book, a research company. Electric vehicles accounted for 7.6 percent of the national automobile market, up from 5.9 percent in 2022.
Tesla reported a gross margin of 17.6 percent for the quarter, below Wall Street’s forecast of 18.3 percent and down from 23.8 percent a year earlier. Excluding the effects of regulatory credits, the gross margin of Tesla’s auto unit – a closely watched measure of its core business – increased to 17.2% for the quarter, slightly above consensus estimates. This is an improvement from 16.3 percent in the previous quarter, which was the lowest level in more than four years.
Margins were squeezed due to price cuts, increased research and development spending and costs associated with increased production of its new Cybertruck pickup. Tesla said capital spending, including for future projects, was at record levels and would exceed $10 billion in 2024.
Tesla is the worst-performing stock this year among the “Magnificent Seven,” which also includes Apple, Microsoft, Alphabet, Amazon, Nvidia and Meta. It has stumbled in recent months even as its peers have hit record highs, and the stock has fallen 16.3 percent this year.
Price declines and rising costs, as well as headwinds such as oversupply and weakening demand, have added to this pessimistic sentiment. The automaker also failed to benefit from an AI-fueled stock price rise relative to its peers, even though Morgan Stanley analysts called it “the only stock truly enabling AI” which it covers.
Musk said during the earnings conference call that he “sees a path to creating an AI and robotics juggernaut of truly immense capabilities” and “in which Tesla could one day be the most valuable company in the world”.
Musk had demanded a larger stake in Tesla in a post on social media platform X earlier this month, in exchange for developing AI products at the electric car maker. He said he was to own 25 percent of the company, suggesting that if his demands were not met he would pursue projects outside of Tesla. In addition to self-driving technology, Tesla has developed a humanoid robot called Optimus.
When asked about the position by investors, Musk said he was worried about being “rejected by some random shareholder advisory firm.”
“I want to be an effective manager of a very powerful technology,” he said. “Twenty-five percent isn’t so much that I could control the company even if I went crazy, but it’s enough for me to have strong influence.”
Musk’s stake in Tesla fell to about 13% after he sold a significant portion to fund his $44 billion acquisition of Twitter, which he renamed X.