Tesla has paid the price for its global price reduction efforts in response to market competition, with multiple financial data for 2023 falling below Wall Street expectations.
On January 25th, Beijing time, Tesla released its fourth quarter and full year financial reports for 2023, showing a revenue of $25.17 billion and earnings per share of $0.71, a significant decrease of 40% year-on-year. Both were lower than FactSet analysts' expectations of $25.6 billion and $0.73.
In terms of gross profit margin, Tesla's gross profit margin continued to decline to 17.6% in the fourth quarter, reaching its lowest level since 2019 and below market expectations of 18.1%. Tesla's gross profit margin for the entire year of 2023 was 18.2%, a decrease of 7.35 percentage points from 2022.
Tesla attributes the decline in profits to a decrease in the average selling price of its vehicles, as well as an increase in operating expenses driven in part by artificial intelligence and other research and development projects.
Unlike Tesla, which has maintained rapid growth in major global markets in the past few years, Tesla is now facing challenges such as weak demand, shrinking profits, and more electric vehicle manufacturers.
In 2023, Tesla's annual revenue was 96.77 billion US dollars, a year-on-year increase of only 19%, far below the high-speed growth of over 50% in the previous two years, and the revenue growth has significantly slowed down.
Tesla is sacrificing profits to maintain market share. Last year, Tesla launched price reduction promotions in multiple countries and regions. In the Chinese market, the average transaction price of Tesla Model 3 has decreased by 34000 yuan to 262000 yuan compared to 2022; The average transaction price of Model Y has decreased by nearly 50000 yuan, entering within 300000 yuan.
Driven by multiple price reduction measures, Tesla delivered 484500 vehicles in the fourth quarter of 2023, with a total of 1.8086 million vehicles delivered throughout the year, barely achieving the delivery target of 1.8 million vehicles.
But frequent and similar measures can only achieve short-term results. Tesla warns investors that the vehicle growth rate in 2024 may be "significantly lower" than in 2023. The company stated that it is currently between two major growth waves. The first wave began with the global expansion of the Model 3/Y platform, and the next wave will be initiated by the global expansion of the next generation of cars.
Tesla rarely provides specific delivery targets in its financial reports. For a long time, the average annual growth rate of this company has been around 50%. Previously, analysts estimated that Tesla's sales would reach 2.2 million vehicles in 2024, an increase of approximately 20% compared to 2023.
Affected by lower than market expectations in the financial report, Tesla's US stock market plummeted by more than 7% after trading. After more than doubling in 2023, Tesla's stock price has fallen by about 16% this year.
Both BYD in the Chinese market and Hyundai and Kia in the US domestic market have attracted more Volkswagen buyers with a wider range of models than Tesla. These three companies also sell numerous hybrid and plug-in hybrid vehicles, attracting consumers seeking to replace traditional fuel vehicles.
Tesla urgently needs to launch a high-volume model to stimulate sales growth. At the Investor Day event in March last year, Tesla made its first public announcement about the next generation of cars. The price of this electric car called Model 2 is expected to be around $25000.
Tesla executives previously stated that they will comprehensively rethink the production methods of electric vehicles to achieve faster, lower cost, smaller power systems, and lighter weight in the next generation of cars.
According to four sources familiar with the situation, Tesla hopes to start producing a brand new compact crossover car for the mass market by mid-2025, with an expected weekly production of 10000 units and the model code name Redwood.
Tesla CEO Elon Musk revealed during the earnings conference call that Tesla plans to start producing the next generation of cars in the second half of 2025. This car was first put into production at a super factory in Texas, USA, followed by a factory in Mexico.
After multiple ticket cancellations, Tesla officially sold the Cybertruck pickup truck model to the public this quarter. At present, the annual production capacity of Cybertruck at the Texas factory is less than 125000 vehicles. Tesla stated that considering the manufacturing complexity of Cybertruck, it expects the production ramp up period of this model to be longer than other models. Musk warned in October that Cybertruck would not generate significant cash flows within a year to 18 months.
Several investment banks have issued warnings before the release of their financial reports, believing that Tesla will face growth pressure this year. Morgan Stanley has lowered Tesla's target stock price from $380 per share to $345, citing expectations of slowing growth and declining profit margins.
Goldman Sachs pointed out that Tesla's long-term growth potential is promising, but it faces significant risks in the short term. "We believe that the main unfavorable factors include a larger than expected decrease in car prices, intensified competition for electric vehicles, and delays in products/features such as FSD/third-generation platforms."
It is worth noting that regarding the expansion of Chinese automobile companies overseas, Musk stated in the financial report conference call that Chinese automobile companies are the most competitive enterprises in the world, and the success of these companies outside of China will depend on what kind of tariffs and trade barriers are established.
"If there were no trade barriers, they could dominate," Musk pointed out. "We haven't seen any opportunities to collaborate with Chinese car companies yet, but we are happy to provide licenses for other technologies such as overcharged networks and autonomous driving technology."