Tesla Inc.
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Musk, Tesla Team Dial Down Growth Forecast

Jan. 25, 2024
Preparing the company’s next-generation vehicle is starting to command more attention and a growing share of more than $10 billion in planned 2024 capex.

Tesla Inc.’s profit margins fell in the fourth quarter and the electric-vehicle manufacturer’s leaders said production growth in 2024 is likely to be “notably lower” as they devote more attention and cash to preparing the launch of their next-generation car.

Austin-based Tesla produced nearly 495,000 vehicles in the three months ended Dec. 31 and roughly 1.85 million cars in 2023, a 35% increase from the prior year. That growth rate is well below the 50% target CEO Elon Musk has repeatedly outlined in past years—while acknowledging that such a figure isn’t sustainable in perpetuity—and it looks to be significantly lower still this year. On top of that, the company’s gross margin fell more than six percentage points year over year to 17.6% and its operating margin slid nearly eight points from late 2022 to 8.2%. (The operating margin was, however, up slightly from the third quarter, helped by costs decreasing slightly to $2.4 billion.)

Musk and CFO Vaibhav Taneja wouldn’t commit on a conference call with analysts and investors to a specific 2024 margin target, saying only that they’re focusing on cost controls and noting that Tesla is now in a relative growth lull as they shift their attention to designing and making the next iteration of their core vehicle. That means capital spending will grow: Taneja said that number will top $10 billion this year, up from $8.9 billion in 2023 and $7.2 billion the year before.

Musk said that his team’s current plans call for the start of that car’s production “toward the end of 2025” but noted that, because it will use new manufacturing machinery and techniques, a more specific time frame is still difficult to determine.

“We’ll need the engineers to be living on the line,” Musk said about the manufacturing technologies and his team’s decision to base the first next-generation operation at HQ in Austin. “This is not just an off-the-shelf-it-just-works kind of thing.”

Tesla booked net income of $7.9 billion in the fourth quarter, which was more than double the figure from the prior-year quarter and boosted by a massive income-tax benefit. Operating profits came in at nearly $2.1 billion versus $3.9 billion while revenues ticked up 3%—several price cuts limited that number—to $25.2 billion.

The Q4 earnings report and muted outlook for 2024 extends a relatively tough recent run for Tesla, during which the company also has tussled with some European unions, been pushed to respond to the United Auto Workers’ contract successes in the United States with higher wages for many of its workers and needed to plan for a work suspension at its plant near Berlin because of supply-chain delays caused by the Houthi attacks on Red Sea shipping.

Shares of Tesla (Ticker: TSLA) fell 5% to about $198 in after-hours trading on the heels of the earnings report. They’re now down roughly 25% over the past six months, a slide that has cut the company’s market capitalization to about $660 billion.

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