New Delhi: In its recent earnings report, Tesla highlighted challenges to its profitability in the fourth quarter of 2023. Despite achieving a record delivery of 1.8 million electric vehicles (EVs) in 2023, the company faced pressure on profits due to a strategy of price cuts aimed at boosting sales, coupled with expenses related to the production of the Cybertruck and ongoing research and development efforts.
While Tesla continues to expand its sales, the growth in profits and revenue hasn’t mirrored the increase in deliveries. The company acknowledged being “between two major growth waves” and cautioned that the growth of vehicle sales might be significantly lower in 2024. This comes as Tesla prepares to launch a new vehicle platform for a smaller EV priced at around $25,000.
CEO Elon Musk revealed that production of the affordable EV is scheduled to commence in late 2025 at the Texas factory and later expand to a new facility in Mexico, with construction there potentially starting in 2026. Musk emphasized the need for engineers to be closely involved in the production process, necessitating the choice of specific locations.
Tesla reported a net income of $7.9 billion in the fourth quarter, including a one-time non-cash tax benefit. However, the company’s operating income fell by 47%, attributed to increased operating expenses related to AI, R&D projects, Cybertruck production costs, and lower revenue from Full Self-Driving software.
Despite the challenges, Tesla aims to identify a third factory location outside North America by the end of 2024 for further expansion of production. Musk highlighted the incorporation of “revolutionary manufacturing technology” in the new platform.
Tesla’s automotive gross margins, excluding regulatory credits, saw a quarterly increase to 17.2%, a positive development after a period of aggressive price cuts. The company noted reaching the “natural limit” of cost reduction for existing vehicles and expects future profits to come from AI, software, and fleet-based operations.
Although revenue continued to grow, reaching $25.17 billion in Q4, a 3% increase year-over-year, it slightly missed analysts’ expectations. Tesla expressed caution about vehicle growth in 2024 but remains optimistic about the energy storage business, which saw a 125% year-over-year increase in deployments, becoming an increasingly significant part of Tesla’s overall business.