Tesla reported its fourth-quarter 2024 earnings on January 30, showcasing both achievements and setbacks. The electric vehicle giant, led by CEO Elon Musk, faced considerable challenges as the company navigated declining vehicle prices and profit margins, even as it benefited from significant gains connected to the cryptocurrency Bitcoin.
During the quarterly earnings call, Tesla revealed net income for the fourth quarter was $2.32 billion, marking a stark 71% decline from $7.93 billion the previous year. This decline was particularly notable as the 2023 figures included a one-time tax benefit worth $5.9 billion. Despite the drop, Tesla's revenue rose to $25.71 billion, reflecting only a 2% increase year-over-year, which underscored growing concerns about the company’s profitability.
"The imposition of tariffs is very likely and will have an impact on our business and profitability," noted Tesla CFO Vaibhav Taneja, hinting at the potential for significant shifts due to impending trade policies under the new government administration. Well-aware of the competitive pressures from other EV makers, Tesla's leadership acknowledged the necessity of adapting their strategies to maintain market relevance.
One of the few bright spots for Tesla during this challenging quarter came from its Bitcoin holdings. At the end of Q3 2024, Tesla's Bitcoin had a carrying value of $184 million against its market worth of $729 million. A surge in Bitcoin prices significantly bolstered the company's balance sheet, with fair value reaching $1.08 billion by the close of Q4, contributing roughly $347 million to Tesla’s financial results.
New accounting regulations have provided Tesla with additional relief as well, shifting from the previous requirement to report Bitcoin at its lowest market value. The updated policy now allows companies to mark digital assets to market value quarterly. This change increased Tesla's earnings by 68 cents per share, offering some respite amid declining core automotive performance.
Despite the favorable news concerning Bitcoin, Tesla's traditional automotive revenue shrank by 8% during the quarter, hitting $19.8 billion and signaling potential trouble ahead. This slump was attributed to discounted sales across Tesla's range of vehicles, including the Model 3, Model Y, Model S, and Model X lines, as customers are becoming increasingly price-sensitive. The company sold regulatory credits worth $692 million, allowing other automakers to meet stringent emissions standards, providing some financial support.
Looking forward to 2025, Elon Musk expressed confidence during the call, stating, "We expect the vehicle business to return to growth." This optimism contradicts the recent performance slump, aligning with Tesla's ambition to roll out new models. Reports indicate more affordable models are slated for production in the first half of the year, bolstering their efforts to appeal to broader consumer demographics.
Tesla's plans for autonomous vehicles, particularly the highly anticipated Cybercab, are also taking center stage. Musk highlighted expectations for releasing the autonomous service later this year, coinciding with operations commencing at their Austin factory. Describing 2025 as "a pivotal year for Tesla," Musk's predictions come amid considerable skepticism surrounding autonomy goals he has previously outlined.
Nonetheless, Musk acknowledged the trials of asserting Tesla’s dominance within the EV sector, facing pressure from increasing competition from rivals like BYD and traditional automakers ramping up their electric offerings. He also noted, "Affordability remains top of mind for customers," showcasing Tesla’s intention to adjust its pricing strategy to remain competitive.
The earnings call concluded with discussions around Musk’s role at the White House as part of President Trump's advisory board, reinvigorated investor interest as they hope his influence could alleviate regulatory pressures on the company. Nevertheless, with competitive and regulatory landscapes shifting, Tesla shares have seen mixed responses, reflecting investor uncertainty about the company's immediate future.
Overall, as Tesla navigates the currents of the changing EV market, the interplay of innovation, competition, and regulation will remain pivotal. With mixed signals from Tesla’s earnings, stakeholders will have to remain attentive to Musk’s future assertions about the self-driving potential and production strategies as the year progresses.