Investors' blow to Tesla. The electric car manufacturer's stock market valuation worth millions is based on the premise of strong growth. However, the company's revenue grew just 3% in the final quarter of 2023 (and 1% in its automotive business), partly due to price cuts. Additionally, the company warned that volume growth in 2024 will be “significantly lower” than last year. Against this background, Tesla shares fell sharply on the stock market this Thursday. The decline was more than 13% and ended the session at 12.13%, at $182.63 per share. This corresponds to a loss in value on the stock market of around 80 billion dollars (around 74 billion euros) in a single day.
“In 2024, our vehicle volume growth rate could be significantly lower than the growth rate achieved in 2023 as our teams at the Gigafactory in Texas work to introduce the next generation vehicle.” That was the sentence in the quarterly report that set off alarm bells let. In addition, the American company's sales in the fourth quarter increased by only 3% to 25,167 million dollars (around 23,000 million euros, at the current exchange rate). Curiously, profits soared, but with an extraordinary $5.9 billion in deferred tax assets.
Josh Gilbert, market analyst at eToro, emphasized in a note that the company “failed on most key metrics” as “earnings, revenue and gross margins were inadequate in the fourth quarter.” In his opinion, however, the balance sheet has one positive note, namely the gross profit margin in the automotive sector. Despite this data, Gilbert says there are “still many catalysts for optimism among long-term investors given falling battery costs, the outlook for long-term trends in electric vehicle demand, Tesla's investments in artificial intelligence and the development of its solar business.”
It remains to be seen to what extent this “significantly lower” volume growth will affect the development of monetary income. It will depend on price developments. “We continue to believe that Tesla will need to lower prices and record lower margins to increase incremental volume above last year's level of 1.8 million,” said analysts at investment firm Bernstein. “Although 2024 will be a difficult year, it is becoming increasingly clear that 2025 is unlikely to be any better as pressure on growth and margins continues,” they add.
In the conference with analysts, Elon Musk confirmed that Tesla is preparing to launch a new model towards the end of 2025. “Once it comes to market, it will be far beyond any other manufacturing technology that exists in the world.” “It's next level,” he said. Tesla has historically been optimistic about estimated timelines, which are often delayed. In addition, there is a higher risk in this case since the manufacturing process will be “revolutionary,” according to the company. “We believe that mass availability of the Model 2 could not begin until well into 2026, assuming the production chain is not as difficult as what Tesla has experienced with its other new models (Cybertruck, Model 3) that are not insured. says Bernstein.
Musk's statements about his desire for greater control over Tesla are also met with dissatisfaction among investors. The businessman received unprecedented multi-million dollar stock awards. Then he sold shares to invest in other companies (e.g. buying Twitter), and now he complains that his stake isn't high enough and says he's aiming for 25% and that he'll do it If he doesn't achieve this, consider developing artificial intelligence and robotics capabilities outside of Tesla.
A 25 percent stake would prevent him from being driven out by “activists” or the influence of shareholder advisory firms, he argued. “I am not looking for additional profit. I just want to be an effective administrator of a very powerful technology,” he said. “That's what I'm aiming for: strong influence but no control. If there was a way to achieve that, that would be great,” he argued. “I see the path to creating an artificial intelligence and robotics giant with truly immense capacity and power.” He said the ideal would be a two-class structure, but it was not an idea that would win over the market.
Much of Tesla's valuation is tied to the development of these technologies, and none of the options that Elon Musk appears to have left on the table are good for the company: acquiring the companies that would reduce Tesla's value or acquiring one large block of shares, which would dilute the participation of the remaining shareholders.
For the full year, Tesla shares fell 26% amid concerns about lower demand for electric cars and increasing competition in the industry. Tesla ended 2023 as the market leader, but lost share and its margins shrank due to the price cuts the company had to make. The Chinese company BYD became the world leader in electric car sales in the fourth quarter. In the analyst conference this Wednesday, Musk said that without protectionist trade policies, Chinese cars would overwhelm the rest.
Car manufacturers, suppliers and even car rental companies are warning that interest in electric vehicles is waning. General Motors and Ford are scaling back their expansion plans in this segment, while Hertz is selling part of its electric fleet to replace these vehicles with gasoline cars.
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