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A tax cut boosted quarterly profits, but that masked a drop in auto sector profits due to intensified competition.
By Jack Ewing
Tesla’s profit from sales of electric cars slumped in the last three months of last year because of price cuts intended to thwart increasingly intense competition, the company said on Wednesday as it warned of a tough year ahead.
Profit in the fourth quarter nearly doubled to $7.9 billion, up from $3.7 billion a year earlier. But $5.9 billion of that profit came from a tax benefit. Without that one-time accounting effect, profit would have fallen.
Tesla has slashed prices for the two cars that make up the bulk of its sales — the Model 3 sedan and the Model Y sport utility vehicle — as automakers like BYD, in China, and General Motors, Hyundai, Ford Motor and Volkswagen, in the United States and Europe, have begun selling more electric vehicles.
Price cuts have helped Tesla sell more cars and forced other automakers to respond, helping to make electric vehicles more affordable. But the cuts have hurt Tesla’s earnings. In 2022, Tesla was one of the world’s most successful automakers, but its margins fell. almost a part last year and are now comparable to other major competitors.
Due to price cuts, earnings from car sales in the last quarter rose just 1% year-over-year to $21. 6 billion, even though Tesla sold 1. 8 million cars in 2023, up 35% from 2022. Tesla accounted for part of the difference by reducing production costs.
Tesla shares fell hours after the company said it expects “noticeably slower” sales expansion in 2024 as it develops a likely vehicle. Tesla said Wednesday that the new vehicle would generate a big boost in sales, but it has yet to unveil a prototype or indicate when the car will go on sale.
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