Tesla's profits shrink following first annual sales decline
What's the story
Tesla reported a 3% rise in its fourth-quarter adjusted profits, even as it missed Wall Street predictions.
The EV giant, led by Elon Musk, posted a quarterly net income of $2.6 billion after adjusting for one-time items.
The number comes to 73 cents per share, missing analysts' forecast of 77 cents per share.
After the earnings call, Tesla's stock initially dipped but rose over 4% in after-hours trading on Wednesday.
Financial performance
Tesla's Q4 revenue and sales performance
Tesla's fourth-quarter revenue increased 2% to $25.7 billion, falling short of Wall Street's $27.1 billion prediction.
The company offered several incentives during the period to boost demand for its EVs, including low-interest loans and price cuts.
However, Tesla's gross profit margin fell to 16.3% for the quarter, down 1.3% points from a year ago.
Tesla sold 1.79 million vehicles in total in 2024—its first annual drop in over 12 years. However, it sold a record 495,570 vehicles in Q4.
Market dynamics
Tesla's market position and future plans
Despite competition from traditional automakers and other electric vehicle companies such as China's BYD, Tesla's stock has surged.
Since President Donald Trump's election, the company's shares have risen over 50% as investors were optimistic about Musk's advisory role in the new administration.
In a letter to shareholders, Tesla said it plans to boost sales by reducing vehicle costs, one cost measure falling below $35,000 - the lowest in its history.
Future goals
Musk envisions Tesla as world's most valuable company
During the earnings call, Musk shifted focus to other aspects of Tesla's business, saying "AI and robotics - that will bear immense fruit."
He also shared his vision for Tesla to become the world's most valuable company.
Tesla is currently the seventh-most valuable firm in the S&P 500 with a market value of $1.25 trillion.
However, unadjusted profits for Q4 were down significantly at $2.31 billion, a 71% decrease from the same period in 2023 which included a large one-time tax benefit.
Annual earnings
Tesla's full-year profits and future regulatory expectations
For the whole year, Tesla reported profits before one-time items of $8.42 billion, a 23% decline from last year.
Investors are optimistic Musk's close ties with Trump will mean less stringent regulations on Tesla, fewer investigations, and faster autonomous driving development.
However, these hopes are curbed by Trump's plans to cut government incentives for EV purchases and ease emission standards.
These moves that could affect Tesla's huge revenue from selling "regulatory credits" to other automakers failing to meet emission standards.