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Tesla Q4 earnings preview

Tesla's share price jumped by 102% in 2023, primarily due to a price reduction at the beginning of the year, leading to a significant surge in deliveries in the first two quarters, with 440,808 and 479,700 vehicles delivered, respectively.

However, in the third quarter, deliveries declined to 430,488 due to factory upgrades. Tesla's revenue for the last quarter was US$23.35 billion, showing a modest year-over-year growth of 8.8%. The adjusted EPS was $0.66, reflecting a 37% decrease compared to the previous year. The gross profit margin remained at 17.9%, staying below 20% for the third consecutive quarter.

Due to the underwhelming performance in Q3, Tesla's stock price briefly dropped below $200 in late October. However, driven by expectations of a Federal Reserve interest rate cut, the stock has been steadily rebounding since November, recovering all the losses incurred after the Q3 financial report.

Key focus for upcoming quarter

In Q4, Tesla has exceeded Wall Street expectations regarding deliveries, producing 494,989 vehicles and delivering 484,507. Notably, Model 3/Y contributed 461,538 units. 

Despite achieving a record annual delivery of 1.81 million vehicles in 2023, surpassing the 1.8 million target, they fell short of Elon Musk's 2 million goal. As such, the market response has been muted.

Tesla's stock experienced a 4.42% decline in the first week of January. Investors will likely closely watch the fourth-quarter gross profit margin performance, especially considering Tesla's four consecutive price hikes in November for vehicles sold in China. These were driven by profit concerns and increased competition from other electric vehicle manufacturers.

The price adjustments might be aimed at leveraging the "buy high, sell low" psychology of investors to stimulate sales. However, Tesla also reduced prices for inventory vehicles sold in the US and Canada in the last quarter of 2023, likely to counteract the impact of high interest rates on consumer sentiment, indicating a potential further decline in gross profit margin in Q4.

Tesla's performance in 2024

Looking ahead to 2024, the era of subsidies for new energy vehicles is ending. Germany's subsidy programme for electric cars concluded on 18 December 2023, and France tightened subsidies, limiting them to a maximum of €7,000 for electric cars manufactured in Europe as of 15 December 2023.

The subsidy policy decline in European and American countries and low demand caused by high-interest rates may compel Tesla to sustain its low-price strategy. Profit margins may be challenging to improve significantly, and economic downturn expectations might impact sales.

While Tesla may maintain its market share through a low-price strategy, Elon Musk acknowledged significant production challenges for the newly-released Cybertruck.

In the Chinese market, several local manufacturers continued price reduction activities in 2024, indicating an ongoing price war. With new entrants like Xiaomi, competition is expected to intensify.

Tesla's main competitor, BYD, surpassed Tesla for the first time in Q4, becoming the global leader, selling 526 409 electric vehicles in the quarter and achieving total annual sales of 3.024 million electric vehicles.

Tesla Q4 performance forecast

Release date: After-market in US on 24 January 2024 / 25 January 2024 Asia-Pacific

EPS: $0.74 Quarterly revenue: $242.1 billion, a 0.4% year-over-year decrease

Data source: Earnings Whispers

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