According to Tesla's fourth-quarter and full-year earnings report released after the market on Wednesday, the company experienced its first annual profit decline since 2017. Fourth-quarter profit fell sharply by 40%. Revenue and earnings per share fell short of expectations. At the same time, it warned that this year's production, delivery, and shipment growth would slow down, and that this year's delivery target was not announced, causing its stock price to drop 5% after the market. Tesla said it is currently working to research the next generation model. Musk said the next model will be “low cost” and is expected to be put into production in late 2025.

Fourth quarter results fell short of expectations and profits fell sharply

According to financial reports, Tesla's earnings per share in 2023 were $3.12, down 23% from a record $4.07 in 2022; the company's adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was US$16.6 billion, down 13% from the 2022 adjusted EBITDA of US$19.2 billion. However, despite weak earnings, Tesla's revenue reached a record high, with revenue of US$96.8 billion in 2023 increasing 19% over last year.

By business, annual automobile revenue reached US$82.42 billion, an increase of 15% over 2022. The energy sector, which sells solar power generation and energy storage systems, is smaller than Tesla's core business. Its revenue increased 54% to US$6.04 billion, which became the highlight of the financial report. Tesla's “services and other” revenue increased 37% over the same period last year to $8.32 billion.

For the fourth quarter, Tesla reported revenue of $25.17 billion, up 3% year on year, and earnings per share of $0.71, down 40% year over year, both lower than FactSet's analysts' estimates of $25.6 billion and $0.73.

Tesla's fourth-quarter operating revenue fell to 2.1 billion US dollars year over year. Tesla blamed the decline in profit on the lower average sales price of its vehicles and “increased operating expenses driven in part by artificial intelligence and other R&D projects.” The company's gross margin for the fourth quarter was only 17.6%, the lowest level since 2019, down more than 600 basis points from last year, and falling short of the 18.1% expected by analysts. Furthermore, Tesla's free cash flow for the fourth quarter was $2.06 billion, higher than analysts' expectations of $1.45 billion.

Meanwhile, Tesla's delivery volume in 2023 was 1.8 million, of which the fourth quarter set a delivery record of 484,500, which means an annualized delivery increase of 127% over the past five years. However, whether Tesla has the ability to turn growing deliveries into increased profits has left some investors wondering. By the end of 2023, Tesla provided drivers with 5,4892 Supercharger connectors at 5,952 sites around the world.

Tesla's stock price fell more than 6% to 195.01 US dollars after the earnings report was released. The company's stock price has fallen 16% so far this year.

Growth will slow significantly this year Unannounced delivery targets

“Our company is currently in between two major waves of growth,” the company said on Wednesday, indicating that the growth rate of production, delivery and shipment volumes in 2024 is likely to be significantly lower than in 2023.

Tesla has not announced delivery targets for this year, which analysts believe is unusual. For a long time, Tesla has set its multi-year average annual growth rate of 50%. Analysts expect Tesla to sell 2.2 million cars this year, an increase of about 20% over 2023.

The electric pickup truck Cybertruck will increase production and expand delivery in 2024. The company said that the process of increasing production of the Cybertruck will take longer than other models. Currently, production capacity can reach more than 125,000 vehicles per year, but it did not disclose how many pickups it has sold. Musk warned in October last year that Cybertruck pickups may not generate significant cash flow for 1 to 18 months. He said on Wednesday that the battery did not limit Cybertruck's production.

The company said it will continue to develop next-generation models, several teams are developing it in Texas, USA, and will launch next-generation platform products at the Texas Gigafactory. The new models will help update Tesla's product line and may attract a new group of customers. Musk said the next new model will be “low cost” and is expected to be put into production in late 2025.

In its shareholder presentation, Tesla confirmed the launch of a new version of its advanced driver assistance software, which was promoted as a beta or FSD beta option for fully automated driving. The software doesn't enable Tesla cars to drive autonomously because they still require a dedicated driver to sit at the wheel.

Demand is weakening, competition is fierce, and cost pressure is high

Currently, Tesla is facing weakening demand, falling profit margins, and fierce competition from rivals. Earlier, car rental giant Hertz (Hertz) revealed that it is selling about one-third of its electric vehicle fleet because electric vehicles are too expensive to maintain and used cars are less valuable; Hertz promised to buy 100,000 Tesla cars in 2021, which helped Tesla's market value exceed 1 trillion US dollars for the first time. Meanwhile, BYD surpassed Tesla in the fourth quarter to become the world's best-selling electric vehicle manufacturer for the first time.

Additionally, Tesla implemented a new round of price cuts in China and Europe this month, and said it plans to suspend almost all production in Germany from the end of January due to a shortage of parts due to the conflict in the Red Sea region. The company produces Model Y models in the suburbs of Berlin.

Meanwhile, Tesla's labor costs in the US are rising. To make wages competitive with automakers such as General Motors, Ford, and Stellantis, represented by the American Federation of Auto Workers, Tesla recently raised wages for many hourly workers in the US.

On Monday, Morgan Stanley lowered Tesla's share price target from $380 to $345 due to factors such as slowing expected growth and shrinking profit margins. Analysts said growing evidence indicates that the global electric vehicle market is falling into an unfavorable environment of growing supply and slowing demand. Analysts believe that consumers' enthusiasm for electric vehicles is currently declining, partly because of higher prices, and on the other hand, concerns about ease of charging and battery life. These circumstances have made electric vehicle manufacturers more cautious in anticipating consumer demand, and some manufacturers have delayed investment.

However, Musk reiterated on Wednesday that as the Federal Reserve starts cutting interest rates, consumers' ability to bear the cost of Tesla vehicles will increase. Tesla's CFO said the company has been trying to cut costs.

Musk: Hoping to increase equity and expand influence to support the dual ownership structure

Wall Street News previously reported that Musk previously posted that if Tesla develops into a leading company in the field of artificial intelligence and robotics, and he does not have about 25% control over voting, he will feel uneasy. Unless that's the case, he'd rather develop products outside of Tesla. He said Tesla was not a startup, but a dozen, and expressed concerns that it was being overstated.

Currently, Musk owns about 13% of Tesla's shares, and if the Delaware court allows his 2018 compensation plan to remain the same, his shareholding ratio will increase to 20.6% if the options are exercised under the compensation plan.

In response to this, Musk on Wednesday reiterated his desire to acquire more Tesla shares and increase his influence in artificial intelligence and robotics. Musk said, “I see the path to turning Tesla into an artificial intelligence and robotics giant, which will be really powerful.” “I don't want to control it,” he said, adding that he didn't want to be evicted by “some kind of random shareholder consulting firm” vote.

“I'm not looking for additional financial benefits,” Musk said during a conference call on Wednesday and raised the possibility of establishing a dual equity interest. “I just want to effectively control very powerful technology,” he said. He said 25% control would allow him to take control of the company, but still allow investors to kick him out “when I'm crazy.”

“This is my goal... powerful influence, but not control,” Musk said. “It would be great if there was a way to achieve this goal.”

Editor/Somer