Image: Sarah Grillo/Axios
Tesla on Wednesday reported record fourth-quarter profits and sales, but acknowledged it needs to make cheaper vehicles to become a bigger automaker.
Details: The company reported fourth-quarter net income of $3.69 billion and revenue of $24.3 billion, up 59% and 37% year over year, respectively.
- Both reflect best-ever quarterly results despite a continued slowdown in the critical Chinese market.
- The company sold 405,278 vehicles in the fourth quarter, up 31% year over year.
Why it matters: Tesla is under pressure to regain momentum after showing signs of a sales slowdown and a stock price plunge amid a broader industry pullback and CEO Elon Musk’s controversial management of Twitter.
- Tesla stock lost around two-thirds of its value in 2022.
What you say: Tesla acknowledged in an earnings presentation on Wednesday that its prices are “on a downward trend,” but said it “needed to become a multimillion-dollar vehicle maker.”
- The company pledged “relentless cost control and cost innovation” to preserve profit margins.
The big picture: What investors are most interested in is whether the recent round of general price reductions Will pay off.
- “All eyes will be on what that does in terms of sales promotions and profit margins,” Autotrader analyst Michelle Krebs told Axios.
Context: Two weeks ago, Tesla reduced the prices of its US vehicles by an average of $10,000, according to Evercore ISI. These cuts are not reflected in the fourth quarter earnings report.
- Morgan Stanley on Wednesday estimated that Tesla prices would average between $45,000 and $48,000 in 2023.
- “In our view, the price cuts are actually a response to the slowdown in additional demand relative to additional supply,” Morgan Stanley analyst Adam Jonas said in a research note ahead of the earnings report.
Zoom out: Part of Tesla’s problem is that it hasn’t introduced a new consumer vehicle in years, despite increasing competition from General Motors, Ford, Volkswagen, Hyundai, Rivian, Lucid, and others.
- “They have an aging product line — a very limited product line — and a promised pickup that we haven’t seen,” Krebs said.
- Tesla says the long-launched but not yet produced Cybertruck is on track to start production “later this year” in Texas – and it says it has “additional details” about “our next-generation vehicle platform” will deliver “On March 1st
Worthless: Tesla is confident enough in its future growth to announce plans on Wednesday to invest more than $3.6 billion to build a new semi-assembly plant and battery cell factory alongside its existing “Gigafactory” near Reno, Nevada to build.
ًں’ Our thought bubble: As competition intensifies, Tesla is starting to look more like a traditional auto company that has to do things like lower prices or increase incentives when demand slacks.