falling electric car prices increase sales but reduce margins

The American manufacturer Tesla presented its long-awaited annual results on the night from Wednesday to Thursday. The result: Tesla shipped just over 1.85 million electric vehicles worldwide last year. Or 35% more than in 2022. That’s slightly more than CEO Elon Musk’s target of 1.8 million, and the electric car maker is closing in on German premium brands like BMW and Mercedes with their 2.5 million cars sold. Tesla is even a few units behind Audi, which sold 1.9 million cars in 2023. The group increased its sales during 2023, with volume increasing by 13% in the last quarter.

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With 1.77 million units sold, the Model 3 and Model Y drive the group’s sales, thanks to drastic price reductions for these two flagship models worldwide. For example, in France, Tesla has reduced prices three times and now offers the Model Y for 42,990 euros. The other models, Model S and Model X, are on a slight decline.

Overall, Tesla generated a turnover of 96.773 billion dollars, or 88.9 billion euros, 19% more than in 2022.

Weakest growth in 3 years

But the US group saw its operating margin fall from 16.8% to 9.2%. Gross margin also fell 6 points to 17.6% in this latest quarter, while the consensus was 18.3%, according to data from London Stock Exchange Group. Also quarterly turnover Are you here rose 3% to $25.17 billion, missing the consensus forecast of $25.62 billion. This is the weakest growth in more than three years.

These financial results reflect an increase in operating expenses due in part to AI and other research and development projects and the cost of launching the Cybertruck at the end of the year, Tesla reasons.

With its numerous investments, the group was constantly burning cash. Tesla thus sees a drop in its free cash flow this year by 42% to $4.4 billion. Following these results, the group’s shares fell 2.3% after the close of trading.

Less sales in 2024

The market also appeared cautious about the group’s future. For 2024, Tesla has already announced “ the growth rate of vehicle volume (which) could be significantly lower than the growth rate achieved in 2023 “. Situation error between two waves of growth “, the group reasoned during questions with journalists: one was caused by the launch of the Models 3 and Y in 2017 and 2020, and the second wave that started with the new generation vehicle platform. It will be labeled ” total redesign of the production system “, Elon Musk rejoiced.

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In particular, the future platform will allow the production of a new car planned for the second part of 2025. This model, smaller than the previous ones, should target a larger market and will be produced in Texas and then in Mexico. Rumors were already circulating about a price of around 25,000 euros.

The group seems very confident in its AI leadership and is counting on this lead to stand out. However, in this latest quarter, Tesla made a setback in the electric market, being overtaken in sales by China’s BYD for the first time in the fourth half. It thus launched 526,409 cars on the market, i.e. 7% more than Elon Musk’s group.