Tesla warns of ‘notably’ slower growth in 2024 as earnings miss estimates
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After years of breakneck growth, Tesla is bracing for slowing growth and margins as EV demand softens and competition intensifies.
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San Francisco – American automaker Tesla on Jan 24 warned of “notably lower” vehicle sales growth in 2024 and reported a fall in fourth-quarter gross margin as it cut prices and offered incentives to boost demand.
The company said it was in between two growth waves: one driven by the release of Models 3 and Y in 2017 and 2020, respectively, and a second wave that would start with the next-generation vehicle platform.
Earlier on Jan 24, Reuters reported that Tesla had told suppliers it wants to start production of a new mass market electric vehicle (EV), code-named “Redwood”, in mid-2025, likely a compact crossover.
“In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next-generation vehicle at Gigafactory Texas,” Tesla said in a statement.
Wall Street expects Tesla to sell 2.2 million vehicles in 2024, according to market research firm Visible Alpha. That would be up about 21 per cent from 2023, but well below the long-term target of 50 per cent that chief executive Elon Musk set about three years ago. Tesla, however, did not reiterate that target on Jan 24.
Its shares were down 4.3 per cent in after-hours trading.
After years of breakneck growth, Tesla, the world’s most valuable automaker, is bracing itself for slowing growth and margins as EV demand softens and competition intensifies from rivals including BYD, whose model line-ups are less expensive and more varied.
“I don’t think the price cuts are over, mainly for the reason that demand for its electric vehicles is still weak,” said Investing.com senior analyst Jesse Cohen. “The big question is if this is just a blip, or signs of a bigger shift among consumers as higher interest rates and a weaker economic backdrop discourage consumers from making big-ticket purchases.”
Tesla’s average revenue per vehicle delivered dropped to US$45,585 (S$61,034) in 2023, down 16 per cent from the year before.
In the fourth quarter, the EV maker’s average revenue per vehicle dropped more than US$6,800 compared with a year earlier, as the company slashed prices in China, Europe and the United States.
The company reported a gross margin of 17.6 per cent for the three months ended December, compared with 23.8 per cent a year earlier and analysts’ average estimate of 18.3 per cent according to London Stock Exchange Group (LSEG) data.
Interbrand global director of brand economics Greg Silverman said: “Today’s flat sales and substantially reduced margin results are further evidence that Tesla is losing its leadership advantage and its brand leadership has weakened.”
More price cuts?
Tesla slashed prices throughout 2023,
It reduced the price of the Model Y, its most popular vehicle, by as much as 26.5 per cent in the past year in the US.
Tesla stock, which has enjoyed valuations of a technology company partly due to Mr Musk’s promise of self-driving cars, has fallen 16 per cent so far in 2024, after doubling in 2023.
Tesla has been left out of the rally of major tech shares, which has been driven by hopes of interest rate cuts. On an adjusted basis, Tesla earned 71 US cents per share in the fourth quarter, missing an average analysts’ estimate of 74 US cents, according to LSEG data.
The company managed to achieve its 2023 deliveries target of 1.8 million cars, even as Mr Musk warned of a hit to demand from high interest rates.
However, Tesla lost its spot as the top EV maker by sales to China’s BYD in the fourth quarter.
Tesla’s fourth-quarter revenue rose 3 per cent to US$25.17 billion, which marked its slowest pace of growth in more than three years. REUTERS
