Tesla Earnings: Stock Drops; Report Falls Short; EV Maker Warns of 'Notably' Slower Growth (2024)

EV Maker Warns of 'Notably' Slower Growth

Tesla also said its vehicle volume growth "may be notably lower than the growth rate achieved in 2023.”

Investors seeking clarity on what that meant for unit sales didn't get much from the company's earnings call.

Shares are down in after-hours trading.

Tesla stock dipped lower after the earnings call ended, down 5.6% in after-hours trading. The likely reason for the dip was a lack of firm sales guidance for 2024.

Tesla said growth is going to be substantially below 2023's level. Wall Street already expects growth to be lower in 2024.

Tesla shipped some 1.8 million vehicles in 2024, up about 38%. Wall Street expects about 2.1 million to 2.2 million units for 2024, up about 20% compared with 2023.

The vague guidance adds a level of new uncertainty for investors.

Tesla is betting big on self-driving cars. CEO Elon Musk in prior calls hinted that other auto makers were considering licensing Tesla’s so-called Full Self Driving software. No one has licensed that technology yet, Musk said on today's call.

The EV maker is also developing a humanoid robot named Optimus. The AI-trained robot is designed to supplement human labor and do jobs that are either mundane or dangerous. Telsa has “a good chance” of shipping some robots in 2025, Musk said.

Tesla CEO Elon Musk recently posted on his social media platform X that he wanted more control of the EV maker—about 25% of the voting stock, he said.

Without more control, Musk said he would consider taking new artificial intelligence and robotics products to another company, likely founded by Musk, instead of producing them at Tesla.

A question about these comments came up early in the Q&A session.

Musk reiterated that 25% is the level he wants and feels that number gives him the influence he requires at the company.

He said he would accept a new class of super-voting stock. That would mean the board wouldn't necessarily have to give him $30 billion worth of Tesla stock, the amount that would get Musk to 25% control, including his stock options.

A new class of super-voting stock would likely require a shareholder vote.

The first question on the earnings call was about Tesla's next vehicle.

Investors want the EV company to make a lower-priced Tesla model, unofficially called the Model 2.

Musk offered some new details about timing. “I’m often optimistic” about timing, he said, adding the current schedule is to start production of Tesla's next-generation vehicle toward the end of 2025.

That is close to what investors have been expecting. Prior comments from management indicated orders and prototypes in 2024 and production in 2025.

Sooner is better for investors. Tesla introduced the Cybertruck in 2023, but that is a lower-volume vehicle given its price point.

The Model Y SUV, introduced in 2020, became the best-selling car in the world in 2023.

Tesla's earnings conference call began with remarks from CEO Elon Musk. One will disappoint investors.

He praised the performance of the Tesla team. Musk is particularly proud that the Fremont, Calif., plant is the “most productive” automotive plant in the Americas. Fremont produced some 560,000 units in 2023.

Looking ahead, Musk reiterated that Tesla is between “two major growth waves.” Wave one was the commercialization of mass-market battery-electric vehicles. Wave two is partly predicated on self-driving cars and energy-storage applications.

He added: “This is an earnings call, not a product announcement.” That will likely disappoint investors that want to hear more about Tesla's new models, in particular a lower-priced EV that could open up more of the market to the auto maker.

Cybertruck didn’t get a lot of ink in Tesla’s earnings report. The avant-garde pickup was mentioned six times.

The first reference was negative. The cost of the Cybertruck production ramp up hit profitability. The company also reiterated its stance that the Cybertruck production ramp up will take “longer than other models given its manufacturing complexity.”

Along with its hard-to-form stainless steel skin, the Cybertruck employs a "unibody" design versus many trucks that are body on frame. A unibody design, essentially, marries the car chassis and frame into one thing. They can be lighter, safer, and have better handling characteristics than traditional manufacturing methods.

Investors will have to wait until the 5:30 p.m. conference call to hear about production plans and demand. Wall Street currently projects that about 63,000 Cybertrucks will be delivered in 2024. That’s about 3% of Wall Street forecasted total sales volume. Most of those early Cybertruck deliveries will be high-end versions that cost upwards of $100,000.

Tesla released earnings just after 4 p.m., and now there's a bit of a lull until the call starts at 5:30 p.m. You can tune in here.

Tesla stock has settled in since the earnings release, with shares off about 3% in after-hours trading. The call, though, should be the next volatility event, with investors listening for what CEO Elon Musk has to say about volume growth, profitability, and perhaps even the timing of a new model.

With a little time to kill now, we'll sit back, peruse the release, and enjoy the last minutes of quiet until the call is over.

Tesla, of course, does more than just sell cars.

It operates its own network of charging stations while also selling solar roofs to residential consumers and battery storage products to utilities, among other things.

Tesla’s non-automotive sales in the fourth quarter hit $3.6 billion in the fourth quarter, up 4% year over year. For the full year, sales came in at almost $15 billion, up 27% year over year. Non-automotive gross profit margins were about 11% in 2023, up from 4% in 2022.

The company ended the year with 54,892 charging ports in operation, up from 42,419 at the end of 2022.

Tesla deployed 3.2 gigawatt hours of battery storage in the fourth quarter, up 30% year over year. For the full year, Tesla deployed 14.7 gigawatt hours of storage, up 125% year over year.

Solar roof deployment hit 223 megawatts in 2023, down about 35% year over year.

Tesla released what it calls Version 12 of its FSD Beta autonomous driving software in the fourth quarter. FSD is short for Full-Self Driving. Tesla also said in its news release it introduced the second generation of its humanoid robot called Optimus.

Tesla's volume growth will slow in 2024, but that could end up being good news for the stock.

At first glance, there doesn't look to be much good news. Shares were down 2.7% in after-hours trading after both earnings and sales fell short of analyst expectations. But as noted previously, automotive gross profit margins, excluding regulatory credit sales, came in a 17.1%, better than expected. Without that increase, the stock's drop might have been worse.

Still, margins are down from 24.3% reported in the fourth quarter of 2022 as aggressive price cutting eroded profitability. The average price of a new Tesla sold in the fourth quarter was roughly $43,600, down about $8,000 year over year. The average cost to build a Tesla was roughly $36,000, down about $3,000 year over year.

The price cuts were designed to offset the impact of rising rates and to stimulate demand. They worked. Tesla sold some 1.8 million units in 2023, up from 1.3 million in 2022. This coming year is looking tougher. Tesla said in its news release that “our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023.”

Wall Street is currently projecting about 2.1 million units sold in 2024, up 20%. That growth rate is significantly below last year's 38%. For now, Wall Street projections for 2024 unit sales look safe.

If Tesla is satisfied with 20% volume growth for 2024, it might not have to cut prices as aggressively. No more price cuts would be welcomed by investors.

Analysts and investors will have to wait for the company’s conference call, which starts at 5:30 p.m. Eastern time to hear more details.

Tesla earnings missed expectations, but not because of its profit margins.

Automotive gross profit margins, excluding regulatory credit sales, rose to 17.1%, up from 16.3% in the third quarter and better than the 16.7% Wall Street had been expecting. It also ended four-quarter streak of declining margins.