Tesla reported a slight increase in adjusted profits for the fourth quarter, largely driven by aggressive sales tactics, including zero financing offers and various incentives aimed at boosting electric vehicle (EV) sales. However, the results did not meet the expectations set by Wall Street analysts. The electric vehicle manufacturer, along with battery and robotics operations led by Elon Musk, announced on Wednesday that its adjusted quarterly net income increased by 3% to $2.6 billion, translating to 73 cents per share, which fell short of the analyst forecast of 77 cents per share.
Following the release of the earnings report, Tesla’s stock initially declined but later turned upwards by more than 4%. This shift occurred after Musk shared insights during an analyst conference call, indicating that the company was on track to introduce paid “full self-driving” technology without supervision starting in Austin in June. Morningstar analyst Seth Goldstein noted that this transformation from a mere prospect to a definitive timeline is a significant improvement for the company.
Despite facing declining market share in numerous countries due to competition from traditional automakers and other electric vehicle manufacturers like BYD from China, Tesla’s stock has still risen over 50% since Trump’s election as President. Investors remain optimistic, anticipating that Musk’s advisory position in the new administration could benefit the company.
In its communications to shareholders and during the call, Tesla expressed an ambition to increase sales by reducing vehicle costs, pointing out that one cost metric had fallen below $35,000, marking an unprecedented low. The company expects to commence production of more affordable models in the first half of the year, with Musk reiterating that “maximizing volume” remains a top priority.
However, Musk quickly redirected the focus of the call to other ventures within the business, resulting in a rise in the stock price. He highlighted the potential of artificial intelligence and robotics, mentioning a vision for Tesla to become the world’s most valuable company, far surpassing giants like Apple, Microsoft, and Nvidia. Currently, Tesla ranks as the seventh-most valuable entity in the S&P 500, boasting a market capitalization of $1.25 trillion.
For the fourth quarter, Tesla’s unadjusted earnings showed a significant decline, reflecting a challenging comparison to the same period in 2023, which benefited from a substantial one-time tax gain. The company reported $2.31 billion in profits for the most recent quarter, a stark 71% drop from the $7.93 billion profit posted in the previous year’s quarter.
Revenue experienced only a marginal increase of 2%, reaching $25.7 billion, which was below Wall Street’s anticipated $27.1 billion. Throughout the quarter, Tesla implemented various incentives to stimulate demand for its electric vehicles, which included low-interest loans and price reductions. The gross profit margin also fell to 16.3%, declining by 1.3 percentage points compared to the previous year.
Earlier in the month, Tesla disclosed that it sold 1.79 million vehicles in 2024, representing the first decline in over a decade, despite attractive offers like zero percent financing, complimentary charging, and budget leases. However, the fourth quarter exhibited signs of a recovery, as the company reported record sales of 495,570 vehicles.
Wedbush analyst Dan Ives noted that both bullish and bearish investors found data to support their perspectives, emphasizing that the key factor influencing stock performance will be advancements in autonomous driving. He commented on how this was the most optimistic he has ever heard Musk.
For the entire year, Tesla’s profits before adjusting for one-time items stood at $8.42 billion, reflecting a 23% decline from the prior year. The market expects that Musk’s close relationship with Trump could lead to less stringent regulations for the company, along with fewer investigations and accelerated autonomous driving development.
On the flip side, the Trump administration has signaled intentions to reduce government incentives for EV purchases and ease emission standards. This could adversely impact Tesla, which relies on selling regulatory credits to other automakers that fail to meet these standards. The latest financial report revealed that Tesla generated $692 million from these credits in the fourth quarter, a vital cash flow that could be threatened if policy changes are enacted.
