For the fourth consecutive day, Tesla (NASDAQ: TSLA) stock price plunged following the release of its earnings report.
Share prices of the leading electric vehicle (EV) maker closed down 12.1% on Thursday after the company missed sales and profit estimates and gave weak 2024 production guidance. CEO Elon Musk said the company is between two major waves of growth: This suggests that investors will have to be patient until new products help accelerate Tesla’s growth rate again.
Tesla’s automotive sales growth slowed to just 1% year-over-year, reaching $21.6 billion, while total sales rose just 3% to $25.2 billion. Additionally, profits continued to decline, with gross margin falling to 17.6% in the fourth quarter of 2023 from 23.8% in the year-ago quarter and operating income falling 47% to $2.06 billion.
Although Tesla’s growth has slowed significantly, the stock still commands a significant premium to other automakers. This is primarily due to expectations of upcoming disruptive technologies such as fully autonomous driving, the autonomous humanoid robot Optimus and new car models, including a cheaper offering and even “Robotaxi”, a purely autonomous vehicle without a steering wheel.
Musk made predictions about two of these initiatives, and both could be game-changing for Tesla. Here’s what he had to say.
1. Fully autonomous driving could come this year
Fully autonomous driving has become something of a white fish for Tesla, as the company has touted the technology for years but hasn’t yet fully deployed it, although a beta version is available.
For many investors, Full Self-Driving (FSD) is the technology that will make Tesla a truly transformative company. Ark Invest’s Cathie Wood expects robotaxis with FSD technology to make up a majority of the company’s profits as early as 2030, just six years from now.
It’s unclear when Tesla will offer full self-driving, as there are technological, reputational, and regulatory hurdles. However, according to Musk’s comments on the earnings call, it could be coming sooner than most investors think.
In response to a question about other automakers licensing FSD technology, Musk responded: “I really think a lot of automakers should ask about FSD licenses. We’ve had some hesitant conversations, but I don’t think they believe it’s real yet.” I think that will probably be evident this year.”
It’s not exactly clear what Musk means when he says “obviously,” but it sounds like the company is close to making it clear that FSD is real and functional. He also said he is interested in hosting another AI Day later this year, so investors should expect to hear more about the timeline for FSD and could even see a release sometime in 2024.
2. Tesla’s next-generation vehicle arrives in 2025
Tesla has also been announcing a mass-market vehicle for years, and investors finally received information about this launch.
In response to a question about moving production of the next-generation vehicle platform to Austin, Texas, Musk replied: “Our current schedule is that we will begin production towards the end of 2025, which is sometime in the second half of the year. “That’s exactly what we’re doing.” Current schedule says. Musk also admitted that he is “often optimistic about time,” an ironic reference to his previous delivery promises that were not kept. For example, the Cybertruck was originally scheduled to ship in 2021, but it finally hit the market late last year.
Musk has consistently emphasized that price competition is key to the company’s long-term growth and market share gain, and that introducing a mass-market vehicle that could be priced around $25,000 is a cornerstone of that strategy. The Tesla boss also added: “We are very advanced with our next-generation low-cost vehicle” and called the manufacturing system “revolutionary.”
An affordable Tesla vehicle that could compete with vehicles like a Toyota Corolla or a Honda Civic could be crucial for the company, especially if it offers significantly better performance than similarly priced vehicles.
What it means for Tesla investors
Tesla hasn’t provided any guidance for 2024, but it’s likely to be a lost year for the company unless a big announcement about full self-driving is made. Still, the stock’s recent decline seems to adequately reflect the company’s near-term weakness.
If the company can deliver on FSD and the next-gen vehicle, the stock should be a winner over the long term. Of course, Musk’s comments on the timeline aren’t a guarantee by any means, but the potential of another disruption from Tesla should help put a floor on the EV stock, barring further declines in its profit margins or negative revenue growth.