Tesla stock dips as it warns of lower volume growth despite surge in Q4 profit

Tesla reported a 115 per cent jump in fourth-quarter net profit but its stock price dipped almost 9 per cent in pre-market trading on Thursday, as the electric vehicle maker warned of a significant deceleration in vehicle sales growth for the current year.

The company posted a net profit attributable to common stockholders of more than $7.9 billion during the October-December period from $3.7 billion in the same period in 2022. It was the company’s 18th straight profitable quarter.

The increase was primarily due to a one-time non-cash tax benefit of $5.9 billion in the last quarter.

Shares of the company fell 0.63 per cent at the close of trading to $207.83 on Wednesday, giving it a market value of $651.23 billion. The company's shares are down more than 16 per cent since the start of the year.

Shares dropped 5.03 per cent in after-hours trading on Wednesday to $197.38 a share after the company said, “in 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023” as it works towards launching its “next-generation vehicle” in Texas. It dipped almost 9 per cent to $189.55 in pre-market trading on Thursday.

The Texas-based company sold 484,507 vehicles in the October-December period, an annual increase of about 20 per cent. Despite better-than-expected deliveries, the company lost its crown as the world’s largest EV seller to China's BYD, which sold 526,409 vehicles.

Total revenue during the last quarter jumped 3 per cent yearly to more than $25.17 billion, missing analysts’ expectations of $25.62 billion.

It was the second time in a row Tesla has missed revenue guidance since the second quarter of 2019, and the sixth consecutive quarter the company reported $20 billion or more in sales.

“In 2023, we delivered over 1.2 million Model Ys, making it the best-selling vehicle, of any kind, globally. For a long time, many doubted the viability of EVs … today, the best-selling vehicle on the planet is an EV,” Tesla said.

“Our company is currently between two major growth waves … the first one began with the global expansion of the Model 3/Y platform and the next one we believe will be initiated by the global expansion of the next-generation vehicle platform.”

The company's operating income decreased by 47 per cent yearly to more than $2 billion in the last quarter while operating expenses surged 27 per cent to nearly $2.4 billion in the fourth quarter.

Tesla said operating income was primarily affected by various factors including reduced average selling price for vehicles, an increase in artificial intelligence and research, and development-related expenses in addition to the cost of the Cybertruck production ramp.

“Tesla delivered another underwhelming quarter, with a notable miss on automotive gross margins standing out the most … investors were left wanting more from Tesla … with the company held to a higher standard than every other automaker,” Jesse Cohen, senior analyst at Investing.com, told The National.

“Tesla’s worrying China sales figures indicate demand for its vehicles is slowing more than expected in the face of rising competition from local EV companies, including BYD, Nio and XPeng.”

In November, Tesla delivered its first Cybertrucks, four years after the futuristic vehicles first made their debut. The company said it has the capacity to build more than 125,000 Cybertrucks in a year.

In one of its latest rounds of price cuts announced on October 5, Tesla slashed the prices of its Model 3 and Model Y vehicles in the US – its seventh price cut – by up to 4.2 per cent, according to its website.

Analysts expect more price cuts as Tesla attempts to get back in the driving seat.

“I don't think the price cuts are over, mainly for the reason that demand for its EVs is still weak. 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,” Mr Cohen said.

Tesla, which went public in 2010, said its cash, cash equivalents and investments “increased sequentially by $3 billion to $29.1 billion” in the fourth quarter.

It was driven mainly by a free cash flow of $2.1 billion and financing activities of $900 million.

Tesla wrote in its letter to stakeholders: “Cost of goods sold per vehicle declined sequentially to slightly above $36,000.

“Even as we approach the natural limit of cost down of our existing vehicle line-up, our team continues to focus on further cost reductions across all points of production, from raw materials to final delivery.”

In the previous quarter in its energy segment, Tesla’s solar deployments declined to 41 megawatts. This was due to “downward pressure on solar demand as interest rates have remained high”.

Meanwhile, the energy storage deployments increased by 125 per cent year-on-year in the last full year to 14.7 gigawatt hours.