Tesla shares plunged more than 10 percent on Thursday, shaving billions off the company's valuation after CEO Elon Musk failed to address concerns about stagnant growth and continued price cuts in the company's earnings release.
The electric vehicle maker introduced drastic price cuts to maintain demand throughout 2023. This led to a 38 percent increase in vehicle deliveries that barely translated into additional revenue, sparking concern among investors and analysts.
On Wednesday, Tesla reported quarterly results that fell short of analysts' expectations, including annual revenue that grew just 3 percent despite significantly higher sales volume, and a forecast for a potentially “significantly lower growth rate” than in 2023 as the company enters a invested next year. Construction of the generation vehicle is scheduled to begin in 2025.
Meanwhile, CEO Elon Musk is demanding more control over the company after withdrawing a significant portion of his Tesla shares as part of his purchase of Twitter in 2022.
“Tesla is currently between two major waves of growth,” Musk told investors on Wednesday. The company is preparing to ship a He said, making progress towards his next vehicle.
Wall Street watchers expected better news from the earnings release. Dan Ives, a technology analyst at Wedbush Securities, said executives had failed to address near-term concerns, although he remained confident in the company's long-term value.
“We were completely wrong when we expected that Musk and his team would act like adults in the room during the conversation and provide a strategic and financial overview of the ongoing price reductions, margin structure and fluctuating demand. …instead, we got a high-level long-term view of Tesla with another train wreck conference call,” Ives wrote on Thursday.
The company's shrinking margins and “constant, never-ending price cuts” are a concern, Ives wrote.
Gene Munster, managing partner of Deepwater Asset Management, said the company's outlook has given investors pause.
“That was the most sobering forecast I’ve seen from Tesla,” he said.
Musk also faced questions about his public demand for 25 percent of the company's voting shares. Musk said Wednesday he wants the power to resist activist investors who may have “strange ideas” about how Tesla should be run.
“I don't want to control it, but if I have so little influence over the company at this point, I could be kicked out by some shareholder advisory firm,” Musk said.
Tesla laid out further plans for 2024 on the call, including rolling out the latest version of its Full Self-Driving Beta software, the company's advanced driver assistance system, to around 400,000 users.
But the company is facing new challenges from regulators over its Autopilot driver-assistance software, which allows its vehicles to maneuver from highway on-ramp to highway exit, maintaining a set distance and speed, and even changing lanes. Fully autonomous driving brings these capabilities to surface roads, allowing vehicles to navigate from point to point, follow traffic signs and make turns. Drivers must pay full attention at all times when using the software.
Tesla last month agreed to recall 2 million vehicles, almost all of the cars it produces, over concerns that Autopilot does not provide adequate protection against misuse by drivers. The recall, conducted via a remote update, followed a series of meetings with regulators in late 2023 as part of a larger investigation into Autopilot.
Days before the recall was announced, The Washington Post published an investigation that identified at least eight fatal or serious accidents involving Autopilot in locations where the software should not be used.