Tesla announced that its net income doubled in the last quarter of the previous year due to a significant one-time tax benefit, but it warned about significantly low sales growth this year.
The electric car, solar panel, and battery manufacturing company based in Austin, Texas, stated on Wednesday that its net income was 7.93 billion dollars from October to December, compared to 3.69 billion dollars in the same period of the previous year, according to the Associated Press.
Except for one-time items like non-cash tax benefits amounting to $5.9 billion in deferred tax assets, the company earned $2.49 billion, or 71 cents per share. This represents a 39 percent decrease from last year and is lower than analysts’ estimates of 73 cents per share according to FactSet.
Tesla announced quarterly revenue of $25.17 billion, showing a 3 percent increase from the previous year but also falling short of analysts’ estimates of $25.64 billion.
Profit stopped due to the company’s decision to decrease prices worldwide throughout the year in an attempt to enhance its sales and market share.
Earlier this month, Tesla announced that fourth quarter sales had increased by approximately 20%, driven by significant price reductions in the United States and worldwide throughout the year. Some discounts reached up to $20,000 on the higher-priced models.
Tesla shares fell by 6 percent in trading after the markets closed on Wednesday. So far this year, Tesla shares have declined by approximately 16 percent. The sales growth rate of Tesla has been slower than in previous quarters.
Throughout the whole year, sales increased by 37.7 percent, which is lower than the projected growth rate of 50 percent expected by the CEO Elon Musk in most years. The company reported deliveries of 484,507 units during the quarter and approximately 1.8 million for the entire year.
In its message to shareholders issued on Wednesday, Tesla cautioned that sales growth this year could be “significantly lower” than the growth rate in 2023, as the company is working on launching an affordable next-generation car at a factory near Austin.
The message stated that the company is caught between two significant waves of growth, one being the global expansion of the 3 and “Y” models, and the other coming from the new car.
The analyst at “Morning Star Research”, Seth Waldstein, said that Tesla’s results were mixed, with expectations of a slowdown in growth in the near future, but with the possibility of an increase in the customer base when the next generation car is released.
Tesla’s gross profit margin decreased to 17.6% this quarter, a decline of 6.2 percentage points compared to last year, as the profits were affected by price reductions.
Throughout the entire year, Tesla recorded a net income of approximately $15 billion, including one-time tax benefits. Excluding that, the company achieved $10.88 billion, a decrease of 23% from 2022. The overall profit margin was 25.6% in 2022 but dropped to 18.2% last year.
Elon Musk, the CEO of Tesla, said on Wednesday that Chinese car manufacturers will “demolish” global competitors without trade barriers, highlighting the pressures facing the leading American electric car company from companies like BYD, which are racing to expand worldwide, according to Reuters.
Comments from Musk come after the company “BYD”, backed by Warren Buffet, surpassed Tesla as the world’s best-selling electric car company in the last quarter, despite significant price cuts made by the American automaker until 2023.
In a phone call with analysts after the earnings report on Wednesday, Musk stated that Chinese car companies were “the most competitive” and “would achieve great success outside of China” depending on the tariffs or trade barriers imposed.
He said, “If trade barriers are not imposed, it will lead to the destruction of most other car companies in the world. They are very competent.”
Last year, the price war was ignited to attract consumers who were affected by high borrowing costs, which in turn put pressure on Tesla’s margins and raised investor concerns. Musk warned that the company had reached the “natural limit of cost reduction” with its current lineup.
Elon Musk affirmed that Tesla expects to commence the production of the next generation of electric cars in its Texas factory in the second half of 2025.
However, Chinese electric car makers, who have skill in keeping costs under control through a stable supply chain, are moving quickly. With increasing competition and surplus capacity in China, many of them are now rapidly expanding their external presence after years of government support that helped boost domestic sales.
The partner in the consulting company “New Electric Partners” based in Melbourne, Ross Gregori, said, “The completion and flexibility of the infrastructure for handling battery materials managed by the state in China over several decades is extremely difficult.”
He added, “They have a high demand in China with innovations such as in-car technology and battery swapping. We believe that this will be a crucial element and a distinguishing factor in their future growth abroad.”
Comments from Musk also come with the accelerating pace of the US presidential elections. President Joe Biden said that China is determined to control the electric vehicle market and that he “will not allow that to happen”.
Former President Donald Trump, who is the most likely Republican candidate for the presidency this year, indicated that he would double the strongest tariffs if elected, calling for a global tariff of 10 percent on all imports to the United States and the elimination of China’s most favored tariffs.
According to Musk, there is no “clear opportunity” to partner with Chinese competitors, but Tesla has been open to granting them access to its charging network and licensing other technologies such as self-driving.
