Tesla profit doubles due to tax effect, but price cuts hurt
Tesla's profits more than doubled in the last three months of 2023 compared to a year earlier, after the electric car maker booked a tax break. But profits from car sales fell after Tesla cut prices to meet increasingly fierce competition, the company said on Wednesday.
Fourth-quarter profit was $7.9 billion, up from $3.7 billion a year earlier, after Tesla booked a $5.9 billion tax benefit. Without that, profits would have fallen. The company earned $1.9 billion in the third quarter of 2023.
Tesla has cut prices on the two cars that make up the bulk of its sales – the Model 3 sedan and the Model Y SUV – as automakers such as BYD in China, and General Motors, Hyundai, Ford Motor and Volkswagen in the US. The United States and Europe have started selling more electric vehicles.
The price cuts have helped Tesla sell more cars and forced other automakers to respond, making electric vehicles more affordable. But the cuts have weighed on Tesla's profits. In 2022, Tesla was one of the most profitable automakers in the world, but its margins are now on par with other major rivals.
Tesla shares fell in after-hours trading
The company is facing a series of challenges this year, including economic uncertainty in all its major markets and questions about the future role of CEO Elon Musk. Mr Musk surprised investors this month when he said on X, the social media site he owns, that he wanted Tesla's board to increase his stake in the company from 13 to 25 percent, essentially giving him shares worth more than $80 billion. .
If he doesn't get his wish, Mr. Musk said, he will develop new artificial intelligence products “beyond Tesla.” Tesla's board has not commented publicly.
The automaker controls more than half of the electric vehicle market in the United States, and has more models than any other manufacturer eligible for $7,500 tax credits under rules that took effect Jan. 1. Falling prices for lithium, cobalt and other materials essential for battery production should help reduce production costs.
Tesla has started selling the Cybertruck, a pickup that is the company's first new model since the Model Y in 2020. But Tesla remains dependent on the Model 3 and Model Y for sales. BYD and Volkswagen offer, together with the brands Audi, Porsche and Skoda, we offer a larger selection of vehicles.
Another challenge is slowing sales growth of electric vehicles. Surveys show that many people are interested in electric vehicles but are hesitant to buy them due to high prices and concerns about finding enough places to charge the cars.
In a setback, Hertz said this month it would sell some of its Tesla fleet because they were less profitable than expected and because some customers were struggling with the unfamiliar technology.
Election year politics add another element of uncertainty for all electric vehicle manufacturers. Former President Donald J. Trump, the frontrunner for the Republican nomination, has called electric vehicles a hoax, and his supporters have vowed to reverse the Biden administration's policies aimed at promoting the cars and boosting domestic production encourage.
Senator John Barrasso, a Wyoming Republican who has supported Mr. Trump, recently portrayed electric vehicles as a subsidy for wealthy liberals at the expense of “hardworking families in my home state.”
The Inflation Reduction Act, the legislation passed by Democrats that provides financial support to companies building battery factories and auto assembly plants in North America, “is a shakedown,” Mr. Barrasso said at a hearing this month.
Such comments do not bode well for Tesla and other automakers that have ramped up investment in the United States because of government incentives that could disappear if Republicans regain control of the White House and Congress.