London CNN –
Shares of Tesla plunged as much as 11% after the market opened on Thursday, losing $73 billion in market value, just hours after the company warned of slowing growth in electric car sales and an existential threat from Chinese rivals.
In an earnings presentation on Wednesday, the world's most valuable automaker said its sales growth this year “could be significantly lower” than last year as the company continues development of the “next generation” vehicle, likely a cheaper model.
While Tesla reported a significant 38% increase in deliveries last year compared to 2022, Tesla had previously targeted a compound annual growth rate of 50% over several years.
Tesla's (TSLA) financial results for the latest quarter were also disappointing, with adjusted earnings per share falling 40% year-over-year and revenue rising 3% to over $25 billion, falling short of market forecasts.
It was the second straight quarter the company fell short of analysts' forecast earnings, following a string of better-than-expected results stretching into early 2021.
The stock's price doubled throughout 2023, but those gains only came in the first half of the year and Tesla shares had a weak start to 2024, falling 16% ahead of Wednesday's earnings report. The stock is currently trading at its lowest level since April last year.
Thursday's intraday losses were comparable to an unusually large daily decline of 11.4% in late December 2022. At the time, investors were worried about the outlook for Tesla's sales and profitability, as well as the health of the U.S. economy.
Tesla's fourth quarter results were also announced Win under pressure. The company's operating margin nearly halved to 8.2% from the same period in 2022, partly due to an increase in costs related to production of the Cybertruck pickup. The new model went into production at the end of 2023.
Dan Ives, an analyst at research firm Wedbush, said Tesla's earnings release gave investors “minimal answers” to the company's shrinking margins.
“We were completely wrong to expect that Musk and his team would act like adults in the room on the call and provide a strategic and financial overview of the ongoing price reductions, margin structure and fluctuating demand,” he wrote on Thursday in a note.
Tesla has been cutting prices for more than a year to boost sales as the company faces increasing competition from rivals in China.
China's BYD beat Tesla in the last three months of last year and sold more cars than Elon Musk's carmaker for the first time.
Musk told analysts on Wednesday's conference call that Chinese automakers are “the most competitive auto companies in the world” and “will have significant success outside of China.”
“Frankly, I think that if there are no trade barriers, most other automobile companies in the world will be all but destroyed,” he said.
Increasing competition from BYD and other Chinese automakers has triggered an anti-dumping investigation by European officials that could lead to the imposition of higher tariffs on car imports from China. Dumping is the practice of exporting goods to a country at prices that do not reflect their costs.
While Tesla's earnings were “disappointing and uncharacteristic,” Garrett Nelson, a senior equity analyst at CFRA Research, expects the launch of its lower-cost vehicle over the next few years to “provide the catalyst the stock needs,” he wrote in a note Wednesday.
Ben Barringer, technology analyst at Quilter Cheviot, is also optimistic. He believes the general economic environment is starting to change in Tesla's favor.
“Interest rates will start to fall. This will be hugely beneficial for both Tesla and the entire automotive sector as consumers tend to purchase their vehicles on a financing basis,” he wrote in a note on Thursday.
Chris Isidore contributed reporting.