Tesla's Q4 2023 financial report falls short of expectations

25 January 2024

Today Tesla announced its financials for the fourth quarter of the last year as well as combined results for the entire 2023 and - judging by the market’s response alone - all is not good in Elon’s house.

While the company successfully met its goal of delivering 1.8 million electric vehicles to customers for the year, the Q4 numbers reveal falling margins.

Tesla reported a total revenue of $25.2 billion for Q4 2023, marking a modest 3% year-over-year increase. Gross profits experienced a 23% percent decline compared to the same period the previous year.

Despite this, net income, soared by an impressive 115% year over year. The sudden boost in net income can be attributed primarily to a one-time non-cash tax benefit of $5.9 billion in Q4, related to the release of valuation allowance on certain deferred tax assets. Which is to say it's not a direct result of the company's current performance.

Zooming out to the entire year of 2023, Tesla's total revenues reached $96.8 billion, with a significant chunk, $82.4 billion, stemming from automotive revenues, reflecting a healthy 15% increase compared to the previous year. Yet, the profit margin for the year dwindled from 16.8% in 2022 to 9.2% in 2023. Additionally, free cash flow for the year took a substantial 42% hit.

The standout performer in Tesla's lineup was undoubtedly the Model Y, which played a pivotal role in the company's success in 2023. In a rare event Tesla broke down the Models 3 and Y sales by model - delivered 1.2 million Model Ys last year, with around 500,000 Model 3 units hitting the roads. Aggressive price cuts in the US, Europe, and China contributed significantly to this feat.

Tesla made big strides in expanding its supercharger network, growing it by 27% in the past year, boasting a total of 5,952 stations with 54,892 ports. Of those 2,339 Tesla Supercharger stations are in the US and Canada, providing a total of 25,893 charging points.

Tesla's energy storage business thrived, deploying 14.7 GWh of battery storage, marking a remarkable 125% increase year over year. In contrast, the solar activities appear to be dwindling, witnessing a 36% year-over-year decrease.

What's perhaps most notable is Tesla's decision to abstain from providing specific guidance for the upcoming year. Instead, the company simply mentioned the ongoing work on the next-generation vehicle platform. In a somewhat cautionary note, Tesla warned that the vehicle growth rate in 2024 might be "notably lower."

Tesla's once-stratospheric valuation, which outpaces all other automakers, has been built on promises of astronomical growth and tech-sector profit margins. However, these recent results appear far more down-to-earth, and industry analysts are starting to temper their expectations.

Despite Elon Musk calling it an AI company, Tesla is finally becoming an automotive manufacturer - with all its ups and downs. The company is losing the start-up shine and replacing it with steady, reliable progress accompanied by less-than-spectacular financials.

The market has responded instantly with Tesla’s shares trading at $191.75 at the time of writing - that's a whopping $57 less than it was at the start of 2024. It’s a big drop in just 3 weeks but zooming out again, the shares are up $47 in the last 12 months - now that’s a healthy 33% bump beating the 26.3% achieved by S&P500.

Tesla still has plenty up its sleeve to get the numbers up - the $25,000 “Redwood” project is about to get real, the latest FSD 12 is getting good reviews from impressed customers, Giga Nevada is growing again and Giga Mexico has a new boss.

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