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Tesla shares plunged 6 percent lower in indicative trading early morning after a disappointing quarterly report. Recent price cuts put both revenue and profit below analysts' expectations.

The numbers in a row:

  • Revenue clocked in at $25.2 billion in the fourth quarter, or 3 percent more than a year earlier. However, sales from the pure automotive business grew only 1 percent, to $21.6 billion.
  • Net profit, excluding extraordinary items, fell 39 percent in the quarter, to $2.48 billion. Earnings per share fell 40 percent, to 71 cents. Analysts had previously counted on some 73 cents.

What's up: The automaker points to the effect of "pricing and product mix." That's a reference to the price cuts Tesla made in several markets to counter competition.

  • The lower average price could only be partially offset by the increase in the number of vehicles delivered, causing sales to grow more slowly than expected.
  • Profitability is also under pressure from operating costs for research projects, including around AI. The production start of the much-discussed Cybertruck is also chasing costs higher.
  • These higher costs outweighed favorable effects, such as the drop in raw material costs and tax breaks thanks to President Biden's Inflation Reduction Act, though anything but a great friend of CEO Elon Musk.

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Zooming out: Over a longer period of time, Tesla remains a strong growth company. Annual sales are 19 percent higher than a year earlier and roughly double every two years, bringing the $100 billion mark within sight.

  • But competition, including from Chinese giant BYD, is increasing in the electric car market.
  • Important: Tesla predicts that volume growth for cars will be less this year than in 2023 because it is in transition to a new technology car-building platform at its Texas Gigafactory.
  • CEO Elon Musk has stressed repeatedly that investors should not view Tesla purely as a car builder. The company predicts that the fast-growing business around energy storage will grow much faster than the car business by 2024, just as it has in recent years.

👉 "Our company is currently between two major growth waves: the first began with the global expansion of the Model 3/Y platform. We believe the next one will be deployed through the global expansion of our next-generation vehicle platform," Tesla said.

Initial stock market reaction: Tesla released the figures after the close of U.S. stock markets. In preliminary trading, the stock price stood at a 6 percent loss Thursday morning. On Asian stock markets, Tesla suppliers such as LG Display (-4 percent) declined.

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