Tesla CEO Warns of Potential Slowdown in EV Sales in 2024
Electric vehicle giant Tesla is facing a new challenge as it looks towards the future. According to their recent earnings report, the company may experience a decline in profits and revenue in the coming years despite record-breaking sales numbers.
“Even as Tesla’s deliveries have grown, its profits have narrowed.”
Despite continued efforts to drive sales through price cuts, the expenses of bringing their highly-anticipated Cybertruck into production has put a strain on the company’s profitability. Additionally, investments in research and development for future products have also contributed to this strain.
With the successful launch and rapid growth of their Models Y and 3 over the past few years, Tesla has seen significant increases in vehicle sales. However, their earnings report cautions that this growth trend may not continue. The company is in a transitional period and expects a “notably lower” growth rate in vehicle sales in 2024 as they prepare to launch a new platform for a smaller EV model with a price point of around $25,000.
A New EV on the Horizon
The highly-anticipated smaller and more affordable EV model is set to begin production in late 2025 at Tesla’s factory in Texas. CEO Elon Musk shared that this location was chosen because it will allow engineers to live and work directly on the production line, a vital consideration for the new technology involved.
“The smaller EV will eventually expand to a factory in Mexico, but Tesla wants to first demonstrate success with the new platform in Austin before beginning construction.”
Senior Vice President Drew Baglino reiterated this statement, emphasizing that the company wants to prove their success with the new platform in Texas before moving on to the next stage of production in Mexico. This suggests that construction at the Mexican factory may not begin until 2026.
Musk also announced plans to identify a third factory location outside of North America by the end of 2024 to continue the expansion of the smaller EV model’s production.
He noted that there is a “tremendous amount of new revolutionary manufacturing technology” involved in this new platform, promising exciting advancements to come.
Operating Income Takes a Hit
In the fourth quarter, Tesla reported an impressive net income of $7.9 billion on a GAAP basis, which included a one-time non-cash tax benefit of $5.9 billion. However, the company’s operating income, which offers a more accurate picture of their financial performance, saw a 47% decrease from the same period last year at $2.06 billion.
Revenue Continues to Grow
Tesla’s revenue in Q4 was $25.17 billion, a 3% increase from the same quarter last year. This just slightly missed analysts’ expectations, who predicted revenue of around $25.62 billion.
Despite the slower growth rate, Tesla remains optimistic about the potential for their energy storage business. As storage deployments were up 125% year-over-year, the company plans to include these figures in future quarterly reports alongside their vehicle production and delivery numbers.
Musk reaffirmed his previous statements that the storage business has the potential to grow much faster than the vehicle business, making it a significant area of focus for Tesla’s future growth.