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CNN
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Tesla’s shares experienced a sharp drop of up to 11% after the market opened on Thursday, causing the company to lose $73 billion in market value. This occurred shortly after the company issued a warning about slowing growth in electric car sales and the threat posed by Chinese competitors.
During an earnings presentation on Wednesday, the world’s most valuable automaker mentioned that its sales growth for the current year “may be notably lower” than in previous years as it focuses on developing the “next-generation” vehicle, which is expected to be a lower-priced model.
Despite achieving a significant 38% increase in deliveries last year compared to 2022, Tesla fell short of its previous target of sustaining a 50% annual growth rate over several years.
Tesla’s (TSLA) financial results for the last quarter also disappointed, with adjusted earnings per share decreasing by 40% from the previous year. Revenue, which increased by 3% to surpass $25 billion, was below market expectations.
This marks the second consecutive quarter that the company has failed to meet analysts’ earnings forecasts, following a series of results that exceeded expectations since the beginning of 2021.
Although the stock doubled in price over the course of 2023, most of the gains were made in the first half of the year. Tesla shares did not perform well at the start of 2024, experiencing a 16% decline leading up to Wednesday’s earnings report. The stock is currently trading at its lowest level since April of last year.
Thursday’s intraday losses were similar to a particularly large one-day decline of 11.4% in late December 2022, during which investors were concerned about Tesla’s sales outlook, profitability, and the state of the US economy.
Qilai Shen/Bloomberg/Getty Images
Tesla electric vehicles sit outside a showroom in Shanghai, China in October 2022.
Tesla’s fourth-quarter earnings also revealed a decrease in profits, with the company’s operating margin nearly halving to 8.2% compared to the same period in 2022. This was partly driven by increased costs associated with the production of the Cybertruck pickup, which began production at the end of 2023.
Dan Ives, an analyst with market research firm Wedbush, criticized Tesla’s earnings call for providing “minimal answers” regarding the company’s shrinking margins. In a note on Thursday, he expressed disappointment at the lack of strategic and financial insight into ongoing price cuts, margin structure, and fluctuating demand.
For over a year, Tesla has been reducing prices in an attempt to boost sales, as it faces intensifying competition from Chinese rivals. China’s BYD outsold Tesla in the final three months of last year, marking the first time the Chinese carmaker surpassed Elon Musk’s company in sales.
Musk acknowledged the significant success of Chinese carmakers during the earnings call on Wednesday, stating that they are “the most competitive car companies in the world” and predicting that they will achieve substantial success outside of China.
The increasing competition from BYD and other Chinese automakers has prompted an anti-dumping investigation by European officials, which could result in higher tariffs on car imports from China. “Dumping” refers to the practice of exporting goods to a country at prices that do not reflect their actual cost.
While Tesla’s earnings were described as “disappointing and uncharacteristic,” Garrett Nelson, a senior equity analyst at CFRA Research, anticipates that the launch of its lower-cost vehicle in the next few years will serve as “the catalyst the stock needs,” as mentioned in a note on Wednesday.
Ben Barringer, a technology analyst at Quilter Cheviot, also expressed optimism, believing that the broader economic environment is beginning to favor Tesla. In a note on Thursday, Barringer suggested that a decrease in interest rates would benefit Tesla and the wider automotive sector, as consumers tend to finance their vehicle purchases.
Chris Isidore contributed reporting.
