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Tesla has now announced its earnings for the fourth quarter of 2023, broadly missing consensus estimates for key financial metrics.
Before delving straight into Tesla's financial performance for Q4 2023, do go over Wall Street's consensus expectations for key metrics summarized in the chart above.
Tesla (NASDAQ: TSLA) Q4 2023 Earnings
Tesla has reported $25.167 billion in revenue for the third quarter of 2023, missing consensus expectations of $25.722 billion (as per Tesla's IR-compiled consensus estimate).
Revenue Comparison (in Millions of Dollars)
The following snippet summarizes the EV giant’s production activities during the quarter:
Typically, the fourth quarter is the strongest sales period for Tesla, and the just-concluded quarter did not deviate from this well-established norm. As we reported in a dedicated post earlier this month, Tesla delivered 484,507 units in the last quarter of 2023, bringing its total deliveries for the year to 1.808 million units.
Tesla began guiding in 2021 that it would grow its annual production by around 50 percent for the foreseeable future. However, in light of the demand-related headwinds that the company faced throughout the year, prompting the EV giant to resort to a series of margin-destroying price cuts in key markets to maintain sales, this guidance could not be met.
Tesla's auto gross margin (ex-Regulatory Credits) was expected to print at 16.70 percent, as per Wall Street's consensus estimates. Against these expectations, Tesla recorded an auto gross margin (ex-RC) of 17.19 percent.
Auto Gross Margin (ex-RC)
Note the material increase in this metric from Q3 2023. This suggests that Tesla's auto margin has likely bottomed out. Nonetheless, given that Tesla's CFO refused to provide any solid guidance on margins, the risks still remain elevated.
The EV giant has reported a free cash flow of $4.4 billion for the entire 2023 and $2.1 billion for the fourth quarter.
Finally, Tesla has announced $0.71 in non-GAAP (adjusted) EPS, missing IR-compiled consensus expectations of $0.73.
EPS Comparison
1/3 FWIW... our understanding is... it's the 'two forward twenty years back' rule. So, $TSLA went back to their origin, found $5.752bn in losses, and used it in the fourth quarter to offset taxes in 2023. This is CLEARLY inviting a fight with the IRS. https://t.co/AXi4TNs7so
— Gordon Johnson (@GordonJohnson19) January 24, 2024
Our readers should note that Tesla's income statement this time around included nearly $6 billion in tax offsets. Without this juggernaut, the EV giant would have reported an adjusted EPS of just around $0.50 per share.
The following snippet summarizes Tesla’s latest guidance:
At the time of publication, the EV giant's stock is down around 3 percent in after-hours trading. Do note that Tesla has stated that its growth rate in 2024 will be "notably lower" than what it achieved in 2023 as it prepares for "next-generation" vehicles in 2025.
Elon Musk noted during the earnings call that Tesla will likely launch a new, cheaper model by the end of 2025.
"If rates fall quickly in 2024 then $TSLA margins will be good. If they don't fall quickly then margins won't be good."
-- Elon
— Brad Freeman (@StockMarketNerd) January 24, 2024
As far as Tesla's margins are concerned, Musk believes that the interest rate trajectory in the US will be the primary driving force.
Earnings Context
$TSLA 4Q earnings: All eyes on 4Q auto gross margins ex-RC and mgmt’s FY’24 production guidance. 4Q Adj EPS isn’t really that important. On the conf call, investors will look for signs that auto gross margins have bottomed, timing of $25K vehicle, speed of CT ramp, and Optimus…
— Gary Black (@garyblack00) January 23, 2024
Tesla's Cybertruck is expected to enter volume production sometime in 2025. Just a few hours back, Reuters reported that another Tesla model might enter volume production next year. As we noted in a dedicated post earlier today, Tesla has reportedly informed its suppliers that it wants to begin production of an entry-level $25,000 EV, internally dubbed "Redwood", by June 2025. The company has already sent requests for price quotes to certain suppliers of key components based on a volume production level of 10,000 units per week, equating to around 520,000 units per year.
Elon Musk had announced at Tesla's annual shareholders' meeting (AGM) back in May 2023 that the EV giant would soon launch two new products, alluding to a robotaxi and an entry-level EV, entailing a cumulative increase in sales of around 5 million units per annum.
For its $25,000 model, Tesla is apparently relying on automation and its "unboxed" production process, where ultra-high pressure presses are used to die-cast almost the entire vehicle in one go, to try to preserve its already-under-pressure margins. Also, the EV giant will have to ramp up the production of its 4680 battery packs by orders of magnitude to meet the 2025 deadline for the new EV.
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