Tesla’s profits from electric car sales fell in the final three months of last year due to price cuts intended to thwart increasingly intense competition, the company said Wednesday, warning against a difficult year ahead.
Fourth-quarter profit nearly doubled to $7.9 billion from $3.7 billion a year earlier. But $5.9 billion of that benefit came from a tax benefit. Without this one-off accounting effect, profit would have fallen.
Tesla slashed prices on two cars that account for the bulk of its sales – the Model 3 sedan and Model Y sport utility vehicle – as automakers including China’s BYD and General Motors, Hyundai, Ford Motor and Volkswagen , in the USA. The United States and Europe have started 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 weighed on Tesla’s profits. In 2022, Tesla was one of the most profitable automakers in the world, but its margins on vehicle sales have fallen by almost a third over the past year and are now comparable to other major competitors .
Due to price cuts, car sales revenue last quarter rose just 1% from a year earlier, to $21.6 billion – even though Tesla sold 1 .8 million cars in 2023, an increase of 35% from 2022. Tesla made up part of the difference by reducing manufacturing costs.
Tesla shares fell about 6% after hours after the company said it expects “notably slower” sales growth in 2024 as it develops a affordable price. Elon Musk, Tesla’s chief executive, said in a conference call Wednesday that the vehicle, whose design is still secret, could be available by the end of 2025.
“It will be a challenge,” he warned, due to the development of new technology to make the car more cheaply.
As of Wednesday’s close, Tesla stock was down 17% from where it was at the start of the year and down more than 25% from its 12-month high in July.
The automaker faces a range of challenges this year, including economic uncertainty in all of its major markets and questions about Mr. Musk’s future role. He surprised investors this month when he said on X, the social media site he owns, that he wanted Tesla’s board to increase its stake in the company from 13 to 25 %, giving him shares worth more than $80 billion.
If he doesn’t get his wish, Mr. Musk said, he will develop new artificial intelligence products “outside of Tesla.” Tesla’s board of directors has not responded publicly.
Mr. Musk said Wednesday that he needed 25 percent to protect him from being ousted “by a sort of random shareholder advisory company. He added: “There are a lot of activists who infiltrate these organizations and have, you know, strange ideas about what should be done. »
Mr. Musk did not specify how Tesla’s board could grant him an equity stake worth $80 billion without diluting the value of Tesla shares.
The automaker controls more than half of the U.S. electric vehicle market and offers more models than any other manufacturer eligible for $7,500 tax credits under rules that took effect Jan. 1. battery production is expected to help reduce manufacturing costs.
Tesla has started selling the Cybertruck, a pickup truck that is the company’s first new model since the Model Y in 2020. But Tesla remains dependent on the Model 3 and Model Y for sales. BYD and Volkswagen, as well as its Audi, Porsche and Skoda brands, offer a wider choice of vehicles.
Tesla said 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 large volumes due to a complex 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.
Another challenge is slowing growth in electric vehicle sales. Surveys show that many people are interested in electric vehicles but are hesitant to buy them because of high prices and concerns about finding enough places to charge cars.
In a setback, Hertz announced this month that it would sell part of its Tesla fleet because they were less profitable than expected and because some customers had difficulty with the unfamiliar technology.
Election year politics adds another element of uncertainty for all electric vehicle makers. Former President Donald J. Trump, the front-runner for the Republican nomination, called electric vehicles a hoax, and his supporters pledged to roll back Biden administration policies aimed at promoting cars and encouraging manufacturing national.
Senator John Barrasso, a Republican from Wyoming who supported Mr. Trump, recently portrayed electric vehicles as a subsidy for wealthy liberals at the expense of “hard-working families in my home state.”