Tesla's stock price plummeted as it struggled to deliver its 2023 performance report.
On January 25th local time, Tesla's stock price closed down 12.13%, with a single stock price dropping from $207.83 on the previous trading day to $182.63, the largest daily decline in a year, and its market value evaporating overnight by $80 billion.
This is clearly a direct result of lower than expected performance. The day before the sharp drop in stock price, Tesla released its Q4 and full year financial reports for 2023.
After a full year of price wars worldwide, Tesla achieved its previously set target of 1.8 million with a total annual delivery of 1.8086 million vehicles, and its profit situation has become a focus of market attention.
In 2023, Tesla's gross profit margin, automotive business growth rate and other indicators were lower than market expectations, and it may be difficult to continue performance growth in the future solely by reducing prices. Tesla executives even stated that the growth in 2024 will be relatively low. After the performance conference call, several institutions including Citigroup, UBS, and Wells Fargo Bank have lowered Tesla's target prices.
Quarterly net profit drops by 39%
In the fourth quarter of 2023, Tesla delivered 484500 vehicles, reaching a new quarterly high. On this basis, its quarterly revenue was 25.167 billion US dollars, an increase of 3% year-on-year; The gross profit margin has hit a new low, only 17.6%.
The increase in sales but the decrease in gross profit margin is the result of Tesla's significant global promotion. In the first three quarters of last year, Tesla's gross profit margin was 19.34%, 18.19%, and 17.89%, respectively. The continuous decline in profitability has raised concerns among investors.
Wall Street analysts previously predicted that with the decrease in battery raw material costs, the company's gross profit margin in the fourth quarter may rebound. Since 2023, the price of battery grade lithium carbonate has experienced a sharp decline, which is the main raw material for power batteries. The price decline is conducive to the profit growth of electric vehicle companies. At the same time, Tesla continued to optimize its cost control capabilities in the fourth quarter, with single vehicle costs dropping to nearly $36000. The company stated that it is "approaching the natural limit of cost reduction.".
Nevertheless, Tesla's gross profit margin in the fourth quarter continued to decline to 17.6%, lower than market expectations and reaching a new quarterly low since 2019; The net profit attributable to common shareholders under non US GAAP was $2.485 billion, a year-on-year decrease of 39%.
Based on the delivery situation and financial data for the whole year, Tesla delivered a total of 1.8086 million new cars in 2023, a year-on-year increase of 38%, achieving the previously set annual target of 1.8 million vehicles. However, the price reduction rush caused a significant decline in the company's profitability.
Tesla's total revenue in 2023 was $96.773 billion, a year-on-year increase of 19%; The gross profit margin was 18.2%, a year-on-year decrease of 7.35 percentage points, breaking the benchmark of 20% and reaching a new low in nearly four years; The net profit was $15 billion, an increase of 19% compared to the previous year, while the net profit attributable to common shareholders under non US GAAP accounting standards was $10.882 billion, a decrease of 23% year-on-year.
In terms of cash flow, the net cash generated from operating activities last year was 13.256 billion US dollars, a decrease of 10%. As of the end of last year, the company's free cash flow was approximately $4.4 billion, a decrease of 42% year-on-year; Cash, cash equivalents, and investments totaling $29.094 billion.
The growth rate of the automotive business is slowing down
In addition to gross profit margin, the slowdown in Tesla's automotive business revenue growth is also worth noting.
On the premise of reaching a new quarterly high in car delivery in the fourth quarter of last year, Tesla's automotive business revenue only increased by 1%, which also worries investors that it may be difficult to maintain revenue growth in the future through promotional price reductions.
The company's automotive business revenue in 2023 was 82.419 billion US dollars, a year-on-year increase of 15%, ending the high growth of over 73% and 51% in the previous two years. For Tesla, the automotive business accounts for 85%, with the largest proportion but the slowest growth; Last year, the energy business revenue was 6.035 billion US dollars, a year-on-year increase of 54%; Service and other revenue reached 8.319 billion US dollars, a year-on-year increase of 37%.
During the performance conference call after the financial report was released, investors asked if the company plans to achieve a compound growth rate of 50% in 2024 or 2025. According to previous practices, Tesla generally sets an annual growth rate of around 50%, but this time it has not disclosed its 2024 car sales target, which is extremely rare.
The CFO of the company admitted, "It is expected that Tesla's sales growth will be relatively low in 2024. Previously, the company relied on Model 3 and Model Y for growth, while future growth will rely on the next-generation automotive platform."
The next generation of cars mentioned here will be more affordable. Tesla CEO Musk revealed that the next generation model will be produced at a factory in Texas in the second half or end of 2025.
In 2023, Model 3 and Model Y delivered a total of over 1.739 million vehicles, with Model Y delivering over 1.2 million vehicles, fulfilling Musk's previous goal of being the world's best-selling car, not limited to electric vehicles. Compared to this, its two high-end models have grown slowly, with Model S and Model X delivering a total of 68900 vehicles throughout the year, a year-on-year increase of 3%.
From the perspective of global sales, Tesla's top three markets are North America, China, and Europe.
Twitter analysts point out that Tesla is facing very fierce competition in the Chinese market. The 2023 January December New Energy Manufacturer Retail Ranking released by the China Association of Automobile Manufacturers shows that Tesla's total retail volume was 603700 vehicles, a year-on-year increase of 37.3%, ranking second with a market share of 7.8%, while BYD ranked first with sales of over 2.7 million vehicles and a market share of 35%. In addition, the sales growth rates of Guangzhou Automobile Aion, Geely Automobile, Changan Automobile, Ideal Automobile, and Great Wall Motors in the top ten sales rankings have also surpassed Tesla.
During the phone performance conference, Musk generously appreciated Chinese car companies. He believes that Chinese car companies are the most competitive in the world and can achieve extraordinary success outside of China. "If there were no trade barriers, Chinese car companies could take over most of the other car companies in the world.".
For Japan, the world's third-largest automotive market, Musk believes that Tesla's market share in Japan is still very low, and expects to have at least a considerable market share from non Japanese car manufacturers such as Mercedes or BMW.
Continue to seek cost reduction and efficiency improvement
Tesla has stated that it will continue to increase production and invest in future growth in 2024, while seeking possibilities to further reduce costs and improve efficiency.
Musk believes that Tesla is not just an automotive company, but also a technology company. Before the emergence of the new generation of "affordable cars", the progress of "future technologies" such as artificial intelligence, autonomous driving, and robots has become a focus of investor attention.
Musk is currently seeking over 25% of the company's voting control and has expressed confidence in leading Tesla into an artificial intelligence giant. According to Musk's previous vision of "selling cars for zero profit and making money through software," the fully automated driving business (FSD) is considered one of the company's main sources of revenue in the future.
According to financial reports, FSDBeta (beta version) completed its latest iteration in the fourth quarter of last year, with a cumulative mileage of over 700 million kilometers as of the end of 2023. Currently, FSDBeta is only available in North America with a subscription rate of around 25%. Tesla lowered the North American FSD software price from $15000 to $12000 in September last year.
Of note is the new model Cybertruck (electric pickup truck), which started its first delivery in December last year. This product, hailed by Musk as Tesla's best, has received orders for over 2 million units. The specific delivery situation has not yet been disclosed in the financial report and performance conference call. The company has previously stated that large-scale production and delivery of Cybertrucks is a challenge.
Cybertruck will launch a tour in the Chinese market at the end of January, with 8 electric pickup trucks appearing in 8 cities. However, the company stated that the tour cannot be test driven, and it is still unclear when it will be delivered in the Chinese market.
