Tesla (NASDAQ: TSLA) recently released its fourth-quarter earnings report, which revealed weaker-than-expected results primarily due to intense promotional activity in the auto business. The company reported a record revenue of $25.7 billion for the fourth quarter of 2024, although it fell short of the consensus estimate of $27.2 billion. This represents a 2.15 percent increase year-on-year and a 2.08 percent increase from the previous quarter.
Despite the record revenue, Tesla’s gross profit in the fourth quarter was $4.18 billion, down 5.84 percent year-on-year and a significant 16.37 percent decrease from the third quarter. The company’s gross margin for the quarter was 16.3 percent, which is about half of what it was in the first quarter of 2022. This marks a decrease of 1.3 percentage points from the fourth quarter of 2023 and a decrease of 3.5 percentage points from the third quarter of 2024.
In terms of vehicle deliveries, Tesla delivered a total of 495,570 vehicles in the fourth quarter, which was below the consensus estimate of 512,277. This figure represents a 2.28 percent increase from the same period in 2023 and a 7.06 percent increase from the third quarter. The company’s Model 3 sedan and Model Y crossover accounted for 471,930 units delivered in the fourth quarter, falling short of market expectations.
The main reason for Tesla’s weaker-than-expected results in the auto business was attributed to more aggressive incentives than anticipated, leading to lower average selling prices. This resulted in a lower gross margin, with the automotive gross margin coming in at 16.6 percent, which was 200 basis points below Deutsche Bank’s previous estimate. Excluding credits, the margin dropped to 13.6 percent, down 350 basis points from the prior quarter.
Deutsche Bank analyst Edison Yu’s team noted that the fourth-quarter auto margin was notably disappointing compared to the previous quarter, largely due to the aggressive incentives. Despite the challenges faced in the auto business, Tesla continues to be a key player in the EV market, with a strong focus on innovation and sustainability.
Overall, Tesla’s fourth-quarter earnings reflect the competitive landscape of the auto industry and the evolving market dynamics. The company remains committed to its mission of accelerating the world’s transition to sustainable energy, and despite the challenges, Tesla continues to drive innovation and set new benchmarks in the EV market.
