Tesla, which achieved its annual delivery target of 1.8 million vehicles, delivered a lower than expected financial report.
On January 25th, Beijing time, Tesla released its Q4 and full year financial reports for 2023. In 2023, Tesla has significantly slowed down its pace in both revenue and profit growth. For the profit indicators that the market is concerned about, Tesla once again fell short of expectations, and its gross profit margin in the fourth quarter has dropped to 17.6%, the lowest level since 2019.
At the same time, Tesla is also trying to lower market expectations for 2024: "The vehicle growth rate in 2024 may be significantly lower than in 2023."
This global electric vehicle pioneer is currently struggling with costs, but it is approaching the limit of cost reduction for existing models. According to the plan, Tesla's "lower cost model" will be put into production at a certain time point in the second half of 2025.
The gross profit margin decreases quarterly
According to Tesla's financial report, in 2023, Tesla's total revenue reached $96.77 billion, a year-on-year increase of 19%; The net profit attributable to common shareholders was $15 billion, a year-on-year increase of 19%.
From the above data, it can be seen that Tesla has slowed down its performance growth pace. After all, in 2021 and 2022, the company's revenue growth rates reached 70.67% and 51.35%, respectively. And the net profit growth rate in the above two years reached 127.51% and 665.48%, respectively. Tesla's high-speed growth period has come to an end.
Unlike maintaining rapid growth in major global markets in the past few years, Tesla is now facing challenges from weak demand, shrinking profits, and more electric vehicle manufacturers.
From the fourth quarter, Tesla's total revenue for the quarter was $25.17 billion, a year-on-year increase of only 3%, lower than the previous analyst's estimate of $25.87 billion. Tesla's net profit attributable to common shareholders in the fourth quarter was $7.928 billion. Although it increased by 115% year-on-year, if not in accordance with US GAAP, the above indicators amounted to $2.485 billion, a year-on-year decline of 39%.
Since the beginning of 2023, the company's gross profit margin has been declining quarter by quarter, and the fourth quarter is no exception. Tesla's gross profit margin fell to 17.6% in the fourth quarter, the lowest level since 2019. Previously, the market expected Tesla's gross profit margin for the fourth quarter to be 18.3%. In the first three quarters of 2023, Tesla's gross profit margin was 19.34%, 18.2%, and 17.9%, respectively.
Compared to the same period last year, Tesla's gross profit margin in the fourth quarter decreased by more than 6.2 percentage points. The declining profitability level has also led to a significant decline in Tesla's gross profit margin for the entire year of 2023 to 18.2%, a decrease of 7.35 percentage points from 25.55% for the entire year of 2022.
The growth rate in 2024 may significantly decrease
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.
Over the past year, Tesla has been trying to sacrifice 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.
Under multiple price reduction measures, Tesla delivered 484500 vehicles in the fourth quarter of 2023, a significant increase from 435100 vehicles in the third quarter. Thanks to the price reduction and volume increase, Tesla was able to deliver 1.8086 million vehicles throughout the year and achieve its target of delivering 1.8 million vehicles.
However, the industry is generally concerned that frequent and similar measures can only achieve short-term results. Tesla's disclosure of performance this time is accompanied by a warning: in 2024, Tesla's vehicle (production/delivery/shipment) growth rate may be significantly lower than in 2023. Moreover, the company also mentioned that Tesla's energy storage business and revenue growth rate will surpass the automotive business in 2024.
Moreover, 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.
The new product will be launched in the second half of 2025
Tesla stated in its financial report that the company is currently in between two major growth waves: the first wave of growth began with the global expansion of the Model 3/Y platform, while the next wave of growth will be triggered by the global expansion of the next-generation automotive platform. The company emphasizes that the team is launching the next generation of cars at a super factory in Texas.
During the earnings conference call, Tesla CEO Musk also revealed that Tesla has "made considerable progress" in developing a new low-cost car. Musk also stated that Tesla is approaching the "natural limit of cost reduction for existing models.".
However, he did not disclose further information and only stated that "according to the current schedule, Tesla's new products will start production at some point in the second half of 2025.".
And for Cybertruck pickup trucks, Tesla is also trying to "cool down" market expectations. The company revealed that the current annual production capacity of Cybertruck pickup trucks at the super factory in Texas, USA is less than 125000 vehicles. "Considering the manufacturing complexity of Cybertruck, it is expected that the production capacity ramp up period of this model will be longer than other models."
Cybertruck began trial production in Texas in the third quarter of 2023, with a super factory capacity of over 125000 vehicles. However, at that time, institutions were not optimistic and believed that Cybertruck, as a special product with multiple functions and high complexity, would face difficulties in mass production. The annual production capacity target of 250000 vehicles could not be achieved by 2024, and it may take 12-18 months to contribute positive cash flow.
Talking about Chinese car companies and Optimus
It is worth noting that Musk once again praised Chinese electric vehicle companies during the conference call. He stated that Chinese car manufacturers have strong competitiveness on a global scale. "If trade restrictions are lifted, they will be able to achieve tremendous success in the international market, and may even have an impact on car manufacturers in other countries around the world."
Musk also stated that although Tesla has "no obvious cooperation opportunities" with its Chinese competitors, Tesla is willing to allow them to use its own charging network and license other technologies such as autonomous driving.
Musk's above remarks demonstrate that domestic electric vehicle manufacturers such as BYD have already brought tremendous pressure to Tesla in the process of global expansion.
However, facing competition and bottlenecks in the automotive business, Tesla is attempting to shift market attention to other business areas. At the end of 2023, Musk bluntly stated that Tesla is positioned as a technology company that combines AI and robotics, rather than just a car manufacturer.
During the earnings conference call, Tesla also mentioned the Optimus humanoid robot business. The company claims that Optimus is a highly revolutionary product with potential that even exceeds the sum of all Tesla's other products. "The technology accumulated in the automotive AI field has provided tremendous assistance for the development of Optimus."
"Although I believe we have the opportunity to deliver a certain quantity of Optimus next year, it is difficult to accurately predict. We will release the latest progress every few months," Musk said. Musk believes that the difficulty of Optimus lies in its application, and Optimus may ultimately become the company's biggest business.
The attention of institutions seems to be shifting towards this. Morgan Stanley said, "The imbalance between the supply and demand of electric vehicles may put pressure on Tesla. However, we still believe in artificial intelligence and robots."
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