Tesla Shares Drop by 12% Following Q4 Earnings Miss and Slower 2024 Production Forecast

Shares in electric vehicle (EV) producer Tesla (TSLA) slid by 12% following the report of fourth quarter results that fell short of expectations, coupled with an unfavorable annual production outlook.

In its Q4 report, Tesla posted a revenue of $25.17 billion, falling short of the anticipated $25.87 billion; however, this was a 3% increase compared to the same period last year. The reported adjusted net income and earnings per share (EPS) also missed the mark, coming in at $2.48 billion and $0.71 respectively, compared to projections of $2.61 billion and $0.73.

Tesla's full-year production projection was also less promising. The firm highlighted that the 2024 vehicle volume growth rate might "be notably lower than the growth rate achieved in 2023,” due to efforts focused on the launch of next-generation vehicles at Gigafactory, Texas. This projection places Tesla's estimated output below the 2.19 million vehicles expected by analysts — a figure that would represent a 21% increase on 2023's production.

The company's shares have already fallen by more than 26% in 2023. On a call with market analysts, CEO Elon Musk confirmed the launch of Tesla's next-generation vehicle in the latter half of 2025, reflecting a report from Reuters that revealed Tesla's intention to begin production of an innovative, mass-market EV, codenamed "Redwood," by mid-2025.

The company has ambitious manufacturing goals, with Musk detailing their novel platform destined for Gigafactory Texas that aims to "revolutionize how vehicles are manufactured". He further added that Tesla was well advanced in creating its "next-gen low-cost vehicle” using a highly sophisticated manufacturing system that “far more advanced than any other in the world."

A drag on profits and a decrease in margins likely resulted from Tesla’s aggressive cost-cutting strategies, initiated in the latter part of 2023. The company posted a Q4 gross margin of 17.6%, down from an expected 18.1%, which marks a steep decline as compared to previous quarters.

Tesla has also been dealing with other challenges that have put strain on its shares. Hertz, a rental car firm, disposed of several EVs from its fleet. The company experienced a temporary production halt in Berlin and was also forced to reduce prices in China. Controversial decisions from CEO Elon Musk to demand more stocks have further fanned the flames.

In spite of downturns, Tesla reported fourth quarter deliveries of 484,507, beating expectations of 483,173. This all-time record beat their previous best by nearly 20,000 units. Year-on-year, Tesla’s vehicle deliveries increased by 38% resulting in 1.81 million deliveries and production grew 35% year over year to 1.85 million.

Musk also touched on the issue of his control within the company while outlining Tesla’s ambitious AI aspirations. He expressed concern over the potential loss of his influence triggered by major shareholders' decisions. Musk stressed that he didn’t seek additional economics but merely wished to be “an effective steward of powerful technology.”