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Tesla Warned of Slower Volume Growth Ahead as its Q4 Results Underwhelmed

Nikos Tzabouras Written by Nikos Tzabouras
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Tesla Q4 & Full 2023 Results

The past year was challenging fro the EV industry, with demand dented by high interest rates that make funding costlier, elevated inflation that stresses households and other factors. Tesla definitely faced some adversities and had a disappointing third quarter, as sales had dipped for the first time in over a year, while its inventories continued to balloon. The EV leader tried to mitigate these issues by a series of price cuts, but that led to diminishing revenues and profitability.

Wednesday's latest results were somewhat underwhelming, as lower selling prices continued to weigh. The record Q4 revenue of $25.167 billion constituted an increase of just 3% y/y, which is the smallest in more than three years, while operating margin remained below 10% for third straight quarter. Moreover, the company warned that that vehicle volume growth this year may be lower than the one achieved in 2023 (output was up 38% y/y). [1]

On the other hand, Q4 marked an improvement over the prior quarter, with record vehicle deliveries and production. This had a positive impact on revenues and also helped stop the four-quarter narrowing streak in operating margins. Moreover, the volume slowdown warning, is a result of the preparation for the launch of yet another vehicle.

Tesla Motors Inc has been updating its aging lineup this year. It started deliveries of the futuristic Cybertruck less than two month ago, it updated the Model 3 and a refreshed Model Y is likely to follow this year, which was the best-selling car of 2023 according to the firm. Given the current environment though, the big bet is the production an affordable mass-produced vehicle, likely in the 25K price point. Mr Musk had already confirmed this next-gen vehicle and offered some more insights during Wednesday's earnings call, expecting production to start "sometime in the second half" of 2025. [2]

Markets did not react well to the volume warning and the underwhelming financials. The firm faces increasing competition and China's BYD sold more electrified cars last year, although Tesla remained in the top spot in terms of pure battery electric vehicles (BEVs). The stock slides this month and loses around 8% in today's premarket. However, the EV pioneer is updating its lineup, prepares for a low-cost model, posted record output/sales levels, makes progress on humanoid robots and pushes on the AI and self-driving fronts.

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Nikos Tzabouras

Senior Financial Editorial Writer

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 25 Jan 2024 https://digitalassets.tesla.com/tesla-contents/image/upload/IR/TSLA-Q4-2023-Update.pdf

2

Retrieved 06 May 2024 https://www.youtube.com/watch

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