Tesla’s profit for the last three months of 2023 more than doubled from a year earlier after the electric carmaker booked tax benefits. But profits from car sales declined after Tesla cut prices to fend off increasing competition, the company said Wednesday.
Fourth-quarter profit was $7.9 billion, up from $3.7 billion a year earlier, after Tesla booked a tax benefit of $5.9 billion. Without it, profits would have declined. The company earned $1.9 billion in the third quarter of 2023.
Tesla has cut prices on two cars that make up the bulk of its sales – the Model 3 sedan and the Model Y sport utility vehicle – in China at the behest of BYD and automakers like General Motors, Hyundai, Ford Motor and Volkswagen. The United States and Europe have started selling more electric vehicles.
The price cuts have helped Tesla sell more cars and forced other carmakers to respond, helping make electric vehicles more affordable. But the cuts have affected Tesla’s profits. In 2022, Tesla was one of the most profitable carmakers in the world, but its margins are now on par with other big rivals.
Tesla shares fell in after-hours trading
The company faces a number of challenges this year, including economic uncertainty in all of its key markets and questions about the future role of Chief Executive Elon Musk. Mr Musk surprised investors this month when he said on his proprietary social media site Get shares of value. ,
If his wish is not met, Mr Musk said, he will develop new artificial intelligence products “outside Tesla”. Tesla’s board has not responded publicly.
The automaker captures more than half the electric vehicle market in the United States, and it has more models than any other manufacturer that qualify for a $7,500 tax credit under rules effective Jan. 1. Falling prices of lithium, cobalt and other essential materials for battery production should help lower manufacturing costs.
Tesla has started sales of the Cybertruck, a pickup that is the company’s first new model since the Model Y in 2020. But Tesla is relying on the Model 3 and Model Y for sales. BYD and Volkswagen, with their Audi, Porsche and Skoda brands, offer a large selection of vehicles.
Slow sales growth of electric vehicles is another challenge. Surveys show that many people are interested in electric vehicles but hesitate to buy because of high prices and concerns about finding enough space to charge cars.
In a blow, 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 adds another element of uncertainty for all electric vehicle makers. The frontrunner for the Republican nomination is former President Donald J. Trump has called electric vehicles a hoax, and his supporters have vowed to roll back Biden administration policies aimed at promoting cars and encouraging domestic manufacturing.
Senator John Barrasso, a Republican from Wyoming who has endorsed Mr. Trump, recently characterized electric vehicles as a subsidy for wealthy liberals at the expense of “hardworking families in my home state.”
The Inflation Reduction Act, legislation passed by Democrats that provides financial support to companies that build battery factories and vehicle assembly plants in North America, “is a blow,” Mr. Barrasso said during a hearing this month.
Such comments bode poorly for Tesla and other automakers, which have increased investment in the United States because of government incentives that could disappear if Republicans gain control of the White House and Congress.