Tesla Shares Dip 6% Due to Weaker EV Demand and 2024 Growth Warning

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Written By Vikas Jangid

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  • Musk ties Tesla's profit margins to the pace of interest rate declines.
  • Lower vehicle prices in Q4 affect Tesla's revenue due to macroeconomic factors.
  • The automotive industry, including Tesla, responds with discounts, with a 25% drop in average Tesla vehicle prices in December.
  • Federal Reserve signals expected rate cuts in the second half of 2024, influencing market dynamics.
Tesla Shares Dip 6 and 2024 Growth Warning
Source: Tradingview

Tesla's reported revenue and profit for the fourth quarter fell short of analysts' expectations, with automotive revenue seeing only a 1% increase compared to the previous year. The stock dropped nearly 6% in after-hours trading.

Total revenue rose by 3% from $24.3 billion a year ago. The operating margin for the quarter stood at 8.2%, a decline from the 16% reported in the same period last year but a slight increase from the prior quarter's 7.6%.

The modest increase in automotive revenue can be partly attributed to a decrease in the average selling price, resulting from significant price reductions worldwide in the latter half of the year.

Net income for the quarter more than doubled to $7.9 billion, or $2.27 per share, compared to $3.7 billion, or $1.07 per share, in the previous year. This surge was largely influenced by a one-time noncash tax benefit of $5.9 billion.

Tesla's investor presentation indicated that the growth in vehicle volume for 2024 might be considerably lower than the rate observed last year. The company highlighted its focus on launching a "next-generation vehicle" in Texas and cautioned investors about transitioning between two significant growth periods.

Tesla Quarterly Revenue

Tesla Shares Dip 6% and 2024 Growth Warning (2)
Source; Company Reports
Data as of Jan. 24, 2024

High-Interest Rate and Low Margin

"If interest rates decline rapidly, I believe our profit margins will be favorable. However, if the decline is slow, our margins won't be as strong," Musk stated.

Tesla noted that lower vehicle prices impacted the company's Q4 revenue. The electric vehicle manufacturer implemented substantial price reductions for buyers, responding to macroeconomic factors such as elevated interest rates affecting consumer spending.

The automotive industry responded with discounts on vehicles, marked by a 25% decrease in the average selling price of Tesla vehicles in December compared to the previous year. The Federal Reserve signaled towards the end of 2023 that rate cuts are anticipated in the second half of 2024.

Musk emphasized that it's not a lack of desire to buy Tesla vehicles; rather, people find it challenging to afford them in an environment of high-interest rates.

Musk Aims for More AI Influence

Musk expressed his intention to gain a "significant influence, but not outright control" over Tesla before intensifying efforts in AI.

In recent X (formerly Twitter) posts, Musk, the owner of X, revealed his desire for a 25% voting stake in the company before pushing forward with Tesla's role in the AI landscape. He conveyed discomfort about steering Tesla to lead in AI and robotics without holding approximately 25% voting control – enough to be impactful but not to the extent of being irrevocable.

During the earnings call, when questioned about the impact of his statements on retail investors, Musk explained that although he envisions creating a formidable force in artificial intelligence and robotics, he worries about being ousted by a random shareholder advisory firm without more influence.

Clarifying his position, Musk emphasized that the sought-after 25% control is not intended for absolute dominance, stating it's "not so much that I can control the company even if I go bonkers." He acknowledged the possibility of dismissal under extreme circumstances but stressed that his goal is to have a substantial and influential role in the company.

Tesla’s Humanoid Robot Poised for Potential Release by 2025

Musk mentioned that Tesla has a "good shot at delivering some Optimus units next year."

In development since 2022, Tesla's humanoid robot, Optimus, incorporates AI technology from the company's self-driving cars. A recent video showcased Optimus Gen 2 walking and performing basic tasks.

Acknowledging the uncertainty as it's a new product, Musk assured updates on progress, emphasizing that the Optimus humanoid robot has the potential to become the "most valuable product ever."

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