Tesla shares drop 6% on weak auto revenue, warning of slower growth in 2024

Tesla reported revenue and profit for the fourth quarter that missed analysts’ estimates as automotive revenue increased just 1% from a year earlier. The stock slid almost 6% in extended trading. Here are the key numbers:

• Earnings per share: 71 cents, adjusted vs. 74 cents expected by LSEG, formerly known as Refinitiv.
• Revenue: $25.17 billion vs. $25.6 billion expected by LSEG.

Total revenue increased 3% from $24.3 billion a year earlier. Operating margin for the quarter came in at 8.2%, down from the year-ago quarter’s figure of 16% and slightly higher than 7.6% in the prior quarter. Meager growth in auto revenue was partly due to a reduced average selling price following steep price cuts around the world in the second half of the year. Net income for the quarter more than doubled to $7.9 billion, or $2.27 per share, from $3.7 billion, or $1.07 per share, a year earlier. The increase was mostly due to a $5.9 billion one-time noncash tax benefit. Tesla said in its investor presentation that vehicle volume growth in 2024 “may be notably lower” than last year’s growth rate as the company works toward launching its “next-generation vehicle” in Texas. The company cautioned investors that it’s “currently between two major growth waves.” CEO Elon Musk was asked on the earnings call if investors should be uncomfortable with his stated desire to own 25% of Tesla. The question was in reference to a recent tweet, in which Musk said that’s how much voting control he would want before turning Tesla into a “leader in AI and robotics.” Musk responded by saying he doesn’t want to be in the position to be “voted out by some sort of random shareholder advisory board,” and he floated the possibility of creating a dual-class share structure. Musk highlighted proxy advisory firms Institutional Shareholder Services, or ISS, and Glass Lewis as groups creating challenges, alongside activists that “infiltrate” companies and “have strange ideas about what should be done.” In mentioning ISS, Musk said he calls the group “ISIS,” referring to the Islamic State. ISS didn’t immediately respond to CNBC’s request for comment. When asked about the timeline for production of Tesla’s humanoid robot, called Optimus, executives declined to give any specific guidance. Musk described Optimus as, “something that I think has the potential to far exceed the value of everything else combined” for Tesla. He claimed that Tesla’s technology developed in its automotive unit translates well to the humanoid robot “because the car is just a robot on four wheels.” Optimus is “by far the most sophisticated humanoid robot that’s being developed anywhere in the world,” Musk added. Competitors in the market include Boston Dynamics, Agility Robotics and Figure. Other robotics companies such as Sanctuary, Apptronik, 1X, Fourier and Unitree are all working on dexterous manipulation hardware, mimicking human hands. Musk said Tesla has “got a good chance of shipping some number of Optimus units next year,” but he didn’t specify their capabilities or the cost. Musk admitted on the call that he tends to be optimistic on timelines.

Cybertrucks hit the market

During the quarter, Tesla began selling Cybertrucks to customers. The company said in its investor deck that, “We expect the ramp of Cybertruck to be longer than other models given its manufacturing complexity.” Tesla said it now has the capacity to build more than 125,000 of the vehicles in a year. On the earnings call, Musk called the Cybertruck “our best product ever and a “head-turner.” “I see us delivering somewhere on the order of a quarter-million Cybertrucks a year,” he said, without giving a precise timeframe. For the full year, Tesla said automotive revenue reached $82.42 billion, a 15% increase from 2022. The energy division, which is much smaller than Tesla’s core business, was a bright spot, with revenue rising 54% to $6.04 billion. The unit sells solar energy generation and energy storage systems. Tesla’s “Services and Other” revenue rose 37% from a year earlier to $8.32 billion. Operating income decreased year over year to $2.1 billion in the quarter, with Tesla blaming the declining profits on the reduced average sales price of its vehicles and an increase in operating expenses “partly driven by AI and other R&D projects.” Spending on research and development increased to $1.09 billion from $810 million a year earlier, though it was down from $1.16 billion in the prior quarter. In its shareholder presentation, Tesla confirmed that it had rolled out a new version of its premium driver assistance software, marketed as its Full Self Driving Beta or FSD Beta option. The software doesn’t make Tesla’s cars autonomous, as they still require an attentive driver at the wheel. As of the end of 2023, Tesla had 54,892 Supercharger connectors available to drivers around the world at 5,952 stations. Tesla shares have dropped about 16% so far this year as of Wednesday’s close after more than doubling in 2023.