Tesla shares slide 13% as Musk warns over sales growth
Tesla Prices Of That Profits, Spent Boost Effectiveness Waning Ate To Cutting 2023 Sales Into The Strategy, Is Which
Tesla shares plunged after Elon Musk’s pitch for investors to look past slower sales growth fell flat.
The shares fell as much as 13% on Thursday after Tesla narrowly missed earnings estimates and warned its rate of expansion will be “notably lower” this year.
The company spent all of 2023 cutting prices to boost sales, which ate into profits.
The effectiveness of that strategy is waning, and executives cautioned they’re approaching the limits of efforts to cut costs on the current vehicle lineup. “Tesla is signalling that the days of 50% or even 30% to 40% growth year-over-year is not going to happen in 2024,” Seth Goldstein, a Morningstar Research analyst, said.
“At a certain point, you can’t cut prices anymore,” he said.
In a departure from past practice, Tesla avoided offering specific targets for the year ahead.
The company fell well short of the 50% annual growth that management guided to in the past despite slashing prices throughout 2023. Vehicle deliveries rose 38%, and analysts are predicting a 20% increase this year.
“While 2024 will be a challenging year, it is becoming increasingly apparent that 2025 will likely not be better, with continued pressure on growth and margins,” Toni Sacconaghi, a Bernstein analyst with the equivalent of a sell rating on the stock, wrote in a research note.
Tesla shares are having their worst start ever to a year.
Thursday’s slump is the steepest intraday drop in three months, and the stock is now trading at its lowest since May.
The company generated $25.2bn (€23bn) in revenue, less than the $25.9bn predicted by analysts. Mr Musk suggested this will all be temporary. Tesla is going to build its cheaper, next-generation vehicle as soon as the second half of next year at its factory in Austin in Texas, and then in Mexico.
The company will also make the model at another site in North America. That could help the company appeal to more mass-market buyers who can’t afford the company’s existing EVs, which start at about $39,000 in the US.
“That will be a challenging production ramp,” Mr Musk said of the next-generation vehicle. “Once it’s going, it will be head and shoulders above any other manufacturing technology that exists anywhere in the world. It’s next-level,” he said.
Until then, Tesla will try to reach new consumers with its existing lineup. Its newest vehicle, the Cybertruck, is rolling out gradually. The company said that the ramp up of the stainless steel-clad pickup will be slower than other cars.
- Bloomberg