Tesla Inc. (TSLA) reported its fourth quarter earnings for 2024, marking significant changes driven by both the automotive market and the company's strategy surrounding digital assets. The electric vehicle titan experienced a 2.9% jump in its stock price following the release of quarterly figures, initially met with mixed sentiments but eventually reflected optimism among investors.
According to Tesla's earnings report, the company achieved revenue of $25.17 billion, illustrating modest growth of 2% compared to the previous year. This was overshadowed, though, by an 8% decline in automotive revenue alone, dropping to $19.8 billion. Notably, the decline is attributed to falling average selling prices for key models like the Model 3 and Model Y, as the company navigated intense market pressures and competition, particularly noted within the Chinese electric vehicle sector.
Tesla's profitability took a serious hit this quarter, with net income plummeting 71% to $2.32 billion, translating to 66 cents per share. This stark drop was partly due to the exclusion of the previous year's significant noncash tax benefit, which totaled $5.9 billion. Operating income saw comparable declines, falling by 23% to $1.6 billion, leading to squeezed margins at 6.2%, well beneath prior year performances.
The results also drew attention to Tesla's unusual benefit derived from its holdings of bitcoin. A newly adopted policy by the Financial Accounting Standards Board (FASB) now allows companies to apply mark-to-market accounting for digital assets like bitcoin. This pivotal accounting shift allowed Tesla to record unrealized gains, leading to nearly $600 million being added to its net income during this quarter alone. CFO Vaibhav Taneja stated, "There was a $600 million mark-to-market benefit from bitcoin due to the adoption of a new accounting standard for digital assets." This adjustment boosted the fair market value of Tesla's bitcoin from $184 million to over $1 billion.
Despite these significant gains, the dark shadow of declining vehicle sales loomed heavy over Tesla's quarterly report. The company reported total vehicle deliveries of 495,570 units for the quarter, cementing its first annual decline at 1.8 million vehicles since scaling its production capabilities globally. This downturn has prompted Tesla to adjust its pricing strategies, offering significant inventory discounts aimed at stimulating demand not only in North America but also throughout China, where competition has intensified.
Analysts suggest Tesla's reliance on government regulatory credits, which contributed $692 million to automotive revenue, reflects the company's continuing struggle to maintain traction amid changing market dynamics. The need for Tesla’s strategic adaptations is more pressing than ever as it seeks to navigate its challenges, including increasing competition and profit margin pressures.
The political climate surrounding cryptocurrency also played its part this quarter. The renewed confidence in digital assets was spurred partially by recent developments involving Donald Trump's administration, which has positioned itself favorably toward blockchain technologies. Tesla's substantial bitcoin gains present as both opportunity and risk, as the company continues to hold substantial amounts within the volatile crypto market.
With varied factors at play, including the necessity to increase vehicle appeal through product upgrades and new models, Tesla will likely continue refining its promotional and pricing strategies. The path forward lies not only within its automotive division, but also through ventures within its energy and digital asset branches, with possibilities for diversification amid the tough automotive profit environment.
Overall, Tesla's fourth quarter of 2024 serves as both a reflection of its past successes and indicators of future challenges. The interplay between digital asset performance and traditional automotive sales painted a complex picture of the company as it looks to adapt and lead within the fast-evolving electric vehicle market.