New York — Tesla’s annual profits fell to their lowest level since the pandemic five years ago, as it lost the title of the world’s largest electric car maker to a Chinese competitor and the boycott hurt sales.
The Elon Musk-run electric car company reported Wednesday that net income last year fell 46% to $3.8 billion. This was the second straight year of sharp declines. This decline came despite the introduction of cheaper models and Musk promised to continue focusing on the company after his entry into American politics.
However, Tesla investors maintained their confidence in Musk. The stock is up 9% in the past year.
Musk is urging investors to focus less on car sales and more on what he sees as a bright new future for robotaxis that transport millions in cars without a driver, or even steering wheels, and robots that water plants and care for elderly parents.
In a conference call, Musk said Tesla will shut down production of two models, the S and
In the fourth quarter of last year, Tesla’s net income also fell 61% to $840 million, or 24 cents. Excluding one-time charges, net income was 50 cents per share, compared to analysts’ expectations of 45 cents.
“They have older products that are becoming less competitive as other manufacturers come out with new models, and then there is general brand destruction,” said Sam Abu Al-Samid, a telemetry analyst. “Musk’s involvement in politics has turned away customers.”
One bright spot was Tesla’s gross profit margins, which jumped to 20% in the fourth quarter from 16% a year ago.
“Tesla’s ability to profitably show improvement was a surprise,” said Seth Goldstein, a Morningstar analyst. “I think that’s why the stock is up now.”
Goldstein said he was also encouraged by plans outlined in Tesla’s earnings report to launch robotaxi service in Houston, Miami and five other cities in the first half of this year.
Investors cheered earlier this year when Musk turned his focus back to the company after spending months as head of the government’s cost-cutting team in Washington. But it is not clear that his interest will remain unified in the new year. He’s planning to take his rocket company SpaceX public, possibly in June, in what many expect to be a massive IPO that will make him the world’s first trillionaire — but also likely to distract him.
Tesla’s latest numbers represent a setback for a company that promised a lot a year ago.
After the election of President Donald Trump, investors pushed the stock higher on the bet that his advisory role in the new administration would help the company. Instead, it backfired. Clients angry about his work for Trump and his right-wing political stances boycotted the brand.
Musk had also promised a year ago that European regulators would approve its partial self-driving program within three months, representing a potentially big boost to Tesla sales there. But that didn’t happen either.
Investors were also excited about Tesla’s robotaxi service, which promises rides without anyone driving the car. But instead, they got cars with supervisors inside to man the controls in case something goes wrong, although there may be progress in that regard. Tesla recently said it was removing these safety driver programs in Austin, where it launched the service in June, and pledged to aggressively expand into other cities in the next year.
For some on Wall Street, that’s enough to get excited about the company, and continue to push the stock higher.
Wedbush Securities’ Dan Ives, one of Wall Street’s most optimistic analysts, predicts that robotaxis will be in more than 30 cities by the end of this year, and that Tesla will capture 70% of the global market for self-driving cars within a decade.
Others are also excited about Tesla’s energy storage business, which posted strong numbers last quarter with revenue rising 25% to $3.8 billion. Tesla is benefiting from massive demand as power-sucking data centers are built across the United States