Tesla Earnings Miss Expectations With Growth Slowing in 2024

While the broad stock market has been climbing this year, Tesla Motors shares have underperformed. The slowing adoption of EVs in the U.S., the growth of Chinese EV makers at home and in Europe, and price cutting on EVs to move inventory are three issues holding back Elon Musk’s EV juggernaut.

The company reports a fourth-quarter rise in revenue of 3% to $25.17 billion, its slowest pace of growth in more than three years. Tesla reports adjusted earnings per share of $0.71 vs. a Wall Street estimate of $0.73 and adjusted net income of $2.486 billion vs $2.61 billion expected by the Street. It seems like a small miss, but it sent Tesla shares down because of the company’s reduced forecast for 2024 and negative noise in the overall market for EVs.

Net income more than doubled from the previous year to $7.9 billion, including a $5.9 billion noncash gain related to deferred tax assets.

The report and Musk's call with analysts sent Tesla shares down 4.7% in after hours trading.

Tesla says its “vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next-generation vehicle at Gigafactory Texas.” That would mean the EV company would not reach Wall Street estimates of 2.19 million sales for 2024, which would have been a 21% increase from 2023.

Tesla says vehicle deliveries grew 38% year-over-year in 2023 to 1.81 million and production grew 35% year-over-year to 1.85 million. While its 38% delivery growth rate was below its 50% compound annual growth rate (CAGR) target, Tesla already had warned investors it would not reach that target.

The company forecasts a 21% hike in deliveries in 2024. That figure reflects the slowdown in anticipated EV demand. Musk previously had forecasted 50% annual growth three years ago.

Tesla has been trying to buck the sudden pessimism around EV growth and slowdown in demand with new-product news. The EV maker finally launched the long-awaited Cybertruck last November and began making deliveries to customers. But the rollout of the pickup has been slow, and there are widespread media reports about the trucks that are in owners’ hands having cold-weather issues with performance and range. There is also lingering concern over whether the radical design of the Cybertruck will catch on at the scale that Musk has touted.

On the upside, Reuters reports, citing four executives with knowledge of the project, that Tesla plans to launch a new mass-market-priced compact CUV, code-named “Redwood,” in mid-2025. The starting price of that vehicle, based on Musk’s prior statements, would be about $25,000, but it remains to be seen if the company can make a profit at that price, or if that price reflects the federal $7,500 tax credit that can now be included in a down payment at point-of-sale. Musk confirmed that he intends to start production of vehicles off the new architecture in 2025.

“We are focused on bringing the next generation platform to market as quickly as we can, with the plan to start production at Gigafactory Texas. This platform will revolutionize how vehicles are manufactured,” the company says in its earnings statement.

In Walter Isaacson’s biography of Musk released last year, he reported, based on his interviews, that Tesla also plans to launch a robo-taxi based on the same architecture as “Redwood.”

Tesla’s targeting of the robo-taxi market with its globally powerful brand could be a huge business for the automaker going forward. While the business is nascent at less than $1 billion, various estimates peg it to reach $45 billion to $50 billion by 2030 as China and Europe embrace the business, while growth in the U.S. is expected to be slower, but steady nonetheless.

Tesla Model Y-suv_0_0

Tesla’s current cheapest model is the Model 3/Y sedan, which costs $38,990 in the U.S. Tesla sold 1,740,000 Model 3/Ys globally in 2023. Reuters cites sources saying Musk intends to build over 500,000 of the Redwood vehicles per year when scaled up.

There are several factors holding back investor enthusiasm about Tesla: Musk’s tendency to exaggerate how cheaply he can make products, missing target launch dates for new models by years, the rising fortunes of Chinese EV makers such as BYD, and Musk’s tendency to get distracted on projects and acquisitions, such as his takeover of Twitter and rebranding it “X.”

Musk recently complained that he wants more control of Tesla. “I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control. Enough to be influential, but not so much that I can’t be overturned,” Musk said last week from his account on X.