(News Bulletin 247) – The electric car manufacturer published results below expectations for the fourth quarter of 2023 and warned that the growth in its vehicle deliveries would be weaker in 2024 than that of last year, due to the launch of a new generation vehicle in its gigafactory in Texas.

Will Tesla be ousted from the “magnificent seven” (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, Tesla) of Wall Street? These tech mega-capitalizations, which almost single-handedly carried Wall Street last year, have experienced varying fortunes on the stock markets since the start of the year.

But, among them, only Tesla shows a decline, which turns out to be very marked (-16.4%), due to numerous concerns, such as new price reductions, fierce competition in China, or even the cessation of production at its Berlin site.

Several analysts, notably Wells Fargo, fear that the group will suffer from plummeting growth, due to the high level of interest rates but also a demand for electric vehicles which is running out of steam.

The figures and announcements published Wednesday evening by Tesla will clearly not encourage them to change gear. Moreover, Tesla shares plunged 6% in post-market trading on Wall Street, following the delivery of its fourth quarter results.

A margin that plunges

“Tesla reported fourth-quarter results that missed Wall Street estimates and presented a pessimistic full-year production outlook, leading to a further decline in sales. “action and continued the negative spiral of the electric vehicle (EV) manufacturer which began at the start of the year”, summarizes Stephen Innes of Spi Asset Management.

In the fourth quarter, Tesla’s revenues increased 3% year-over-year to $25.167 billion while automotive revenues increased 1% to $21.56 billion. Data closely followed on Wall Street, net profit per share reached 70 cents, plunging 40% over one year.

According to Bloomberg, analysts were expecting revenue of $25.9 billion and earnings per share of 73 cents.

Due to the numerous price cuts made by Tesla since the end of 2022 to protect its volumes in the face of fierce competition, in particular from the Chinese BYD which doubled it in the last quarter of 2023 in terms of electric vehicles sold, profitability is melting. The operating margin stood at 8.2% in the fourth quarter compared to 16% a year earlier and stood at 9.2% for the whole year.

Slowdown in growth

But the most resounding disappointment is probably more in the outlook given by the company. Tesla has, contrary to its usual practice, not given a delivery target for 2024.

“In 2024, the growth rate of our vehicle volumes could be significantly lower than the growth rate achieved in 2023, as our teams work to launch the next generation vehicle in our Gigafactory Texas,” warned Tesla.

Last year, Tesla delivered 1.808 million vehicles, which reflected growth of 38% compared to 2022, quite far from the 50% per year which constitutes the group’s medium-term objective. For 2024, if Tesla has not given a target, the consensus expects between 2.1 million and 2.2 million units sold, according to Dan Ives, analyst at Wedbush, representing growth of only 17% to 22 %.

Quoted by Reuters, Elon Musk warned analysts that ramping up production of the new generation vehicle would pose certain difficulties. The executive said the move would require “a considerable amount of revolutionary new manufacturing technology.” Which suggests that the rejuvenation of Tesla’s range, likely to boost its growth, will take time.

“I am often optimistic about timelines. But our current schedule shows that we will start production towards the end of 2025, somewhere in the second half of the year,” he added.

The end of an era

“What we took away from Tesla’s earnings call was the company’s strategic shift toward developing and ramping up the new affordable SUV, while focusing on reducing the costs of its vehicles This is a change from the 2023 strategy, which was to reduce prices to generate strong volume growth,” Seth Goldstein, an analyst at Morningstar, said in a note.

“Tesla is signaling that the era of 50% or even 30% to 40% year-over-year growth will not happen in 2024,” said the same expert, in an interview with Bloomberg. “At a certain point, we can no longer lower prices,” he added.

It remains to be seen, however, whether the manufacturer will not further slash its prices even though it no longer seems to make growth the alpha and omega of its strategy this year. “I don’t think the price drop is complete, largely because demand for electric vehicles is still weak,” Jesse Cohen told Reuters.

“Until recently, electric vehicle adoption trends in both Europe and the United States have been largely driven by demand. However, as the supply of electric vehicles increases and the economic benefits of ownership of these same vehicles becomes less convincing, the dynamics of supply and demand seem to be changing. This represents a risk for prices and medium-term profitability of the sector,” Goldman Sachs recently explained in a note.