Tesla Stock Falls 12% as EV Maker Warns Production Growth Will Be ‘Notably Lower’ Than 2023

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Tesla Stock Falls 12% as EV Maker Warns Production Growth Will Be 'Notably Lower' Than 2023
Tesla Stock Falls 12% as EV Maker Warns Production Growth Will Be ‘Notably Lower’ Than 2023

Tesla (TSLA) reported its fourth quarter earnings on Wednesday, January 25, 2024, and missed analysts’ expectations on both revenue and earnings per share. The electric vehicle (EV) maker also issued a downbeat outlook for 2024, saying that its vehicle volume growth rate may be significantly lower than the previous year, as it works on launching a new mass-market EV at its Gigafactory Texas. Tesla’s stock price plunged 12% on Thursday, wiping out more than $100 billion from its market value.

What Tesla Reported

  • Tesla reported revenue of $25.17 billion for the fourth quarter of 2024, up 3% year-over-year, but below the consensus estimate of $25.87 billion.
  • Tesla reported adjusted earnings per share of $0.71, down 28% year-over-year, and below the consensus estimate of $0.73.
  • Tesla reported a gross margin of 17.6%, down from 19.2% in the same quarter of 2023, and below the estimate of 18.1%.
  • Tesla delivered 1.8 million vehicles in 2024, up 21% year-over-year, and slightly above the estimate of 1.79 million.
  • Tesla produced 1.9 million vehicles in 2024, up 23% year-over-year, and in line with the estimate of 1.9 million.

Why Tesla’s Stock Fell

  • Tesla warned that its vehicle volume growth rate in 2024 may be “notably lower” than the 21% growth rate achieved in 2023, as it focuses on launching the next-generation vehicle at Gigafactory Texas, which is expected to start production in the second half of 2025. Tesla did not provide a specific guidance for 2024, but analysts were expecting a 25% growth rate, or 2.19 million deliveries.
  • Tesla said that its profitability was impacted by several factors, including lower prices, higher costs, supply chain challenges, and increased investments in research and development, manufacturing, and service. Tesla lowered its prices worldwide throughout 2024, in an effort to boost its sales and market share, amid rising competition from other EV makers. Tesla also faced higher costs due to inflation, labor shortages, and raw material shortages. Tesla also increased its spending on new technologies, such as its full self-driving (FSD) software, its next-gen manufacturing platform, and its battery innovations.
  • Tesla faced some headwinds in its key markets, such as China and Europe, where it faced regulatory scrutiny, consumer complaints, and increased competition. Tesla’s market share in China declined from 21% in 2023 to 18% in 2024, as local rivals, such as Nio, Xpeng, and Li Auto, gained traction. Tesla also faced delays in opening its Gigafactory Berlin, due to environmental and legal issues, and faced challenges in meeting the stricter emission standards in Europe.

What Tesla’s Future Looks Like

  • Despite the disappointing earnings and outlook, Tesla remains optimistic about its long-term prospects, as it continues to invest in its innovation and expansion. Tesla said that it is “between two big growth waves,” one from the global expansion of the Model 3 and Model Y, and another from the launch of the new mass-market EV, codenamed “Redwood,” which is expected to revolutionize how vehicles are manufactured. Tesla also said that it is making progress on its FSD software, which it hopes to achieve full autonomy in the future. Tesla also said that it is working on improving its battery technology, which it claims will enable longer range, lower cost, and higher safety for its vehicles.
  • Tesla also has some opportunities to grow its revenue streams beyond its core vehicle sales, such as its energy business, its software subscriptions, and its network services. Tesla’s energy business, which includes solar panels, solar roofs, and battery storage, grew 44% year-over-year in 2024, and generated $2.4 billion in revenue. Tesla’s software subscriptions, which include FSD and premium connectivity, grew 36% year-over-year in 2024, and generated $1.9 billion in revenue. Tesla’s network services, which include supercharging, insurance, and car-sharing, grew 48% year-over-year in 2024, and generated $1.6 billion in revenue.

Conclusion

Tesla’s fourth quarter earnings and 2024 outlook disappointed investors, who were expecting stronger growth and profitability from the EV leader. Tesla’s stock price fell 12% on Thursday, reflecting the market’s concerns about Tesla’s ability to maintain its competitive edge and deliver on its ambitious goals. However, Tesla remains confident in its long-term vision, as it continues to innovate and expand its product portfolio, its manufacturing capacity, and its revenue streams. Tesla’s future success will depend on how well it can execute on its next-gen vehicle launch, its FSD software development, and its battery technology improvement, while facing the challenges of a dynamic and competitive EV market.

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Source:
(1) Tesla stock falls 12% as EV maker warns production growth will be ‘notably lower’ than 2023. https://www.msn.com/en-us/money/companies/tesla-stock-falls-12-as-ev-maker-warns-production-growth-will-be-notably-lower-than-2023/ar-BB1hgHx0.
(2) Tesla Stock Slides After EV Maker Projects Slower Growth. https://www.wsj.com/livecoverage/stock-market-today-dow-jones-earnings-01-25-2024/card/tesla-stock-slides-after-ev-maker-projects-slower-growth-bfWFhQLI6nStZSr2QKG1.

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