Tesla's quarterly report significantly missed expectations, but the automotive business is expected to regain growth this year, initially falling then rising in after-hours trading | Earnings Report Insights

On January 29th, Wednesday after the US stock market closed, Tesla released its Q4 2024 financial report, which fell short of market expectations across various metrics including revenue, profit, earnings per share, gross margin, and core automotive business revenue.

However, Tesla anticipates that its automotive business will regain growth this year, and investors are more attracted to the promise of new models starting production in the first half of the year, as well as the company's continued commitment to advancing autonomous driving technology. After initially dropping 5%, the stock price ultimately rose nearly 5%.

1) Key Financial Data

Revenue: In Q4, Tesla's revenue grew 2% year-on-year to $25.71 billion, significantly below analysts' expectations of $27.21 billion.

EPS: The adjusted EPS for the quarter was $0.73, a 3% year-on-year increase, but weaker than analysts' expectations of $0.75.

Operating Profit: The operating profit for the quarter decreased 23% year-on-year to $1.58 billion, significantly lower than analysts' expectations of $2.68 billion. The company attributed this mainly to the decline in average selling prices of models such as Model 3, Y, S, and X.

Net Profit: The net profit for the quarter decreased 71% year-on-year to $2.32 billion, compared to $7.93 billion in the same period last year, which was primarily due to a one-time non-cash tax benefit of $5.9 billion.

Profit Margin: The operating profit margin for the quarter was 6.2%, down from 8.2% in the same period last year and 10.8% in Q3 2024. The gross profit margin for Q4 was 16.3%, weaker than analysts' expectations of 18.9% and also lower than 17.6% in the same period last year.

Capital Expenditure: Capital expenditure for the quarter increased 21% year-on-year to $2.78 billion, exceeding market expectations of $2.72 billion.

Cash Situation: The free cash flow for the quarter was $2.03 billion, although it decreased 1.6% year-on-year, it surpassed market expectations of $1.75 billion.

2) Segment Business Data

Core Automotive Business: Revenue for the core automotive business in Q4 decreased 8% year-on-year to $19.8 billion, of which $690 million came from the sale of regulatory credit points. The gross margin for the automotive business, excluding regulatory credits, was 13.6%.

Energy Business Becomes the Fastest Growing Segment: Revenue from energy production and storage in Q4 was $3.06 billion, doubling with a year-on-year growth of 113%, and the gross profit from the energy business reached a record high, with Powerwall deployments also setting new records.

Musk: This year, testing the unsupervised version of FSD in the US, and launching the supervised version of FSD in China and Europe

Elon Musk stated during the earnings call that Tesla will launch a fully autonomous driving (FSD) version in Austin, Texas, in June this year that does not require human driver supervision. This level of fully autonomous driving capability, which does not require oversight, will subsequently be promoted in the North American market by 2027.

He mentioned that the unsupervised FSD trial in Austin in June will be offered as a paid service, "Tesla vehicles at the Fremont factory in California have already achieved this level of fully autonomous driving, and soon the Texas factory will also realize autonomous driving without human supervision."

An online forum soliciting questions from investors for the earnings report day showed that autonomous vehicle technology is a hot topic of great concern. Tesla stated that it plans to launch a supervised FSD version in China and Europe by 2025. Additionally, investors are also concerned about Musk's role in the Trump administration and the impact of his recent controversial international political and public behavior on the company.

Tesla also revealed in its earnings announcement that vehicle deliveries in the Chinese market reached a record high in the fourth quarter of last year. The company expects overall automotive business across the company to resume growth by 2025, anticipates at least a 50% increase in energy storage deployments this year, and expects the electric pickup Cybertruck to meet the IRS consumer tax rebate standards.

The company stated that the cost-cutting efforts in the fourth quarter were not as significant as originally anticipated, which is related to production line issues. Plans for new, cheaper affordable models are still expected to begin production in the first half of 2025, and the autonomous taxi Cybercab is planned to be produced in 2026, with expectations to "launch its autonomous ride-hailing service in some areas of the U.S. later this year."

Analysts noted that the news regarding the autonomous driving technology and new model production ultimately excited investors, reversing the post-market stock price trend.

Tesla emphasizes: Model Y once again becomes the best-selling model globally in 2024, with significant investments in AI training computing

Tesla stated that the new models planned for production this year will utilize the next-generation platform as well as certain aspects of the company's existing platform, and will be produced on the same production lines as current models. This will result in cost reductions not being as significant as previously expected, but it will also allow:

"To cautiously increase vehicle production in a more capital expenditure-efficient manner during uncertain times. This will help us fully utilize the currently expected maximum capacity of nearly 3 million vehicles, growing over 60% compared to 2024 production levels before investing in new production lines."

Tesla stated that in the fourth quarter of 2024, its vehicle delivery and energy storage deployment volumes both set records, and it expects the Model Y to once again become the best-selling model globally for the entire year of 2024. The new Model Y has now been launched in all markets, and the company also emphasized:

"In 2024, we made significant investments in infrastructure, which will stimulate the next wave of growth, including automotive manufacturing capacity for new models, AI training computing, and energy storage manufacturing capacity.

In the fourth quarter, the sales cost per vehicle dropped to a historic low, below $35,000, primarily due to improvements in raw material costs, helping us partially offset investments in attractive financing and leasing options

Tesla CFO Warns: Trump's Tariffs Will Affect Company Profits, Price Affordability Remains a User Pain Point

Public information shows that in the fourth quarter of last year, Tesla's vehicle deliveries approached 495,600 units, with an estimated annual delivery of about 1.8 million units in 2024, marking the company's first annual delivery decline. Moreover, at the end of last year, Tesla offered a series of discounts to clear inventory, lowering the price of its popular Model Y SUV in China and launching an updated version, the Model Y Juniper.

Tesla acknowledged in its financial report on Wednesday that "price affordability remains the most concerning issue for customers." The company intends to "review every aspect of the sales cost of each vehicle" to help continue lowering the prices of electric vehicles. In recent quarters, Musk has also been telling investors not to focus solely on the core business of selling cars but to pay more attention to future autonomous driving and robotics technologies.

However, some bearish views suggest that half of Tesla's operating profit still comes from the sale of regulatory credits related to emissions (USD 692 million in the fourth quarter), and the significant inventory clearance has led to very low gross margins in the automotive business, indicating that the quality of the financial report is not high.

Analysts also noted that until the end of the earnings call, the company's management did not mention the surprising goal of "20% to 30% growth in automotive sales by 2025," which Musk introduced during the third-quarter call.

Finally, it is worth noting that Tesla's CFO warned during the earnings call that Trump's tariffs in the U.S. will affect company profits. Musk also stated that they will observe whether Trump's repeal of Biden's electric vehicle tax credit policy will have "some degree of impact" on Tesla, but emphasized that competitors will face "devastating impacts."