Tesla's profits more than doubled during the final three months of 2023 compared to a year earlier, after the electric car maker booked a tax benefit. But profits from auto sales plunged after Tesla cut prices to fend off intensifying competition, the company said Wednesday.
Fourth-quarter profit was $7.9 billion, up from $3.7 billion a year earlier, after Tesla posted a tax profit of $5.9 billion. Without that, profits would have plummeted. The company earned $1.9 billion in the third quarter of 2023.
Tesla has cut prices on the two cars that make up the bulk of its sales (the Model 3 sedan and the Model Y sport utility vehicle) as automakers such as BYD, in China, and General Motors, Hyundai, Ford Motor and Volkswagen, in the United States and Europe, have begun to sell more electric vehicles.
The price cuts have helped Tesla sell more cars and forced other manufacturers to respond, helping to make electric vehicles more affordable. But the cuts have hit Tesla's profits. In 2022, Tesla was one of the most profitable automakers in the world, but its margins are now comparable to other major rivals.
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The company faces a number of challenges this year, including economic uncertainty in all of its major markets and questions about the future role of CEO Elon Musk. Musk surprised investors this month when he said on X, the social media site he owns, that he wanted Tesla's board to increase his stake in the company to 25 percent, from 13 percent, effectively giving him more than 80 billion dollars. .
If he doesn't get his wish, Musk said, he will develop new artificial intelligence products “outside of Tesla.” Tesla's board of directors has not responded publicly.
The automaker controls more than half of the electric vehicle market in the United States and has more models than any other manufacturer that qualify for $7,500 tax credits under rules that took effect Jan. 1. Falling prices for lithium, cobalt and other materials essential for battery production should help reduce manufacturing costs.
Tesla has started selling the Cybertruck, a pickup truck that is the company's first new model since the Model Y in 2020. But Tesla still relies on the Model 3 and Model Y for sales. BYD and Volkswagen, along with their Audi, Porsche and Skoda brands, offer broader selections of vehicles.
Slowing EV sales growth is another challenge. Surveys show that many people are interested in electric vehicles but are hesitant to purchase them due to high prices and concerns about finding enough places to charge them.
In a setback, Hertz said this month it would sell part of its fleet of Teslas because they were less profitable than expected and because some customers had problems with the unknown technology.
Election year politics adds another element of uncertainty for all electric vehicle manufacturers. Former President Donald J. Trump, the front-runner for the Republican nomination, has called electric vehicles a hoax, and his supporters have vowed to roll back Biden administration policies aimed at promoting automobiles and encouraging domestic manufacturing.
Sen. John Barrasso, a Wyoming Republican who has endorsed Trump, recently described electric vehicles as a subsidy for wealthy liberals at the expense of “working families in my home state.”
The Inflation Reduction Act, legislation passed by Democrats that provides financial support to companies building battery factories and vehicle assembly plants in North America, “is a shakedown,” Barrasso said during a hearing this month .
Such comments bode poorly for Tesla and other automakers that have increased their investments in the United States due to government incentives that could disappear if Republicans regain control of the White House and Congress.
