Key points:
- Mixed Performance: Tesla delivered a record 495,570 vehicles in Q4, but missed its delivery target and saw its first-ever annual decline in deliveries.
- AI and Energy in Focus: Tesla’s ambitious AI projects and energy business expansion remain critical growth drivers, but rising competition, including the disruptive DeepSeek, adds pressure.
- Margins Under Pressure: Price cuts and rising costs have reduced Tesla’s automotive gross margins to 15%, down from historical highs, raising questions about profitability heading into 2025.
Tesla is preparing to report its Q4 2024 earnings on 29 January, and the stakes are high. With its share price navigating a turbulent path and the company expanding beyond electric vehicles into energy and artificial intelligence, this earnings release could be a pivotal moment. Whether you’re tracking short-term moves or betting on Tesla’s long-term vision, here’s everything you need to know as an investor.
Share Performance: A Tale of Two Speeds
Tesla’s share price has had a bumpy ride recently. Over the past month, shares have climbed 6%, recovering some ground after a 10% dip in December caused by missed delivery targets. However, zooming out, Tesla’s performance over the past year reflects increasing competition and margin pressures, with the company underperforming rivals like BYD and traditional automakers.
For short-term traders, Tesla’s volatility remains an opportunity. For long-term investors, the company’s focus on innovation and diversification keeps its growth story compelling. This earnings report could provide clarity for both camps.
What to Expect: Q4 at Glance
Tesla’s Q4 results are expected to highlight both achievements and challenges:
- Revenue: Analysts predict USD 27.2 billion, an 8.1% year-on-year increase – a steady gain but not electrifying.
- Earnings Per Share (EPS): Estimates range between USD 0.74-0.76, reflecting modest 7% growth.
- Deliveries: Tesla set a new quarterly record with 495,570 vehicles delivered, though it fell short of the 500,000-510,000 target. Total deliveries for 2024 reached 1.79 million, marking Tesla’s first-ever annual decline.
These figures reflect a company navigating growth in a highly competitive and economically challenging environment.
AI: Tesla’s Bold Bet on the Future
Tesla’s AI initiatives are central to its strategy and long-term value. Elon Musk has repeatedly stated that Tesla’s future lies beyond vehicles, with AI playing a pivotal role in transforming the company into a technology leader.
- Full Self-Driving (FSD): Tesla’s FSD technology is a cornerstone of its AI strategy, with ambitions to create a global robotaxi network. While still in beta, progress on FSD could unlock substantial subscription revenue. Updates on regulatory approvals and adoption rates will be critical during the earnings call.
- Dojo Supercomputer: Tesla’s custom-built AI training system, Dojo, is designed to accelerate the development of FSD and other AI projects. Musk has hinted at monetising Dojo as a service, which could open a new revenue stream beyond automotive.
- Optimus Robot: Tesla’s humanoid robot project, Optimus, represents a bold move into robotics and automation. Still in its early stages, Optimus has the potential to revolutionise industries like manufacturing and logistics, aligning with Tesla’s vision of becoming a diversified tech powerhouse.
Musk’s AI ambitions may feel ambitious, but Tesla’s history of turning big ideas into reality keeps investors intrigued. However, a major storyline affecting the broader tech landscape—and potentially Tesla—is the rise of DeepSeek, a Chinese AI startup. Its cost-efficient, open-source AI model has disrupted global markets by demonstrating that cutting-edge AI can run on older, less expensive hardware. DeepSeek’s breakthrough raises questions about the high costs associated with U.S.-developed AI systems, including Tesla’s AI investments in FSD and the Dojo supercomputer. While Tesla’s AI is central to its long-term vision, the emergence of cost-effective competitors could pressure the company to innovate more efficiently.
Challenges: Speed Bumps on the Road Ahead
Tesla faces a range of challenges, including:
- Margin Compression: Price cuts to boost demand have reduced automotive gross margins to around 15%, significantly lower than historical levels of over 25%.
- Economic Pressures: Higher interest rates are making EV financing more expensive, dampening consumer demand.
- Rising Competition: Tesla’s dominance is being tested by rivals like BYD and traditional automakers expanding their EV offerings. The competition is particularly fierce in key markets like China and Europe.
- Delivery Shortfall: Missing Q4 delivery targets has raised questions about Tesla’s ability to sustain its ambitious 2025 growth targets of 20-30%.
Opportunities: The Road Ahead
Despite these challenges, Tesla has several promising growth avenues:
- Energy Storage Expansion: Tesla’s energy business continues to gain traction, with deployments up 240% year-on-year in Q4, contributing an estimated USD 2.6 billion in revenue. This division could become a significant driver of diversification beyond car sales.
- New Product Launches: The long-awaited Cybertruck began deliveries in late 2024, and production is expected to ramp up in 2025. Additionally, a rumoured affordable Model Q could help Tesla expand its market share by appealing to cost-conscious buyers.
- AI and Robotics: Tesla’s advancements in AI and robotics, including FSD and the Optimus robot, could open entirely new markets. These initiatives may take time to mature, but their potential long-term impact is substantial.
What to Watch for on 29 January
Tesla’s earnings call will be packed with updates that could shape its short- and long-term trajectory. Key areas to monitor include:
- Profit Margins: Can Tesla stabilise margins after a year of price cuts?
- 2025 Guidance: Will Tesla reaffirm its ambitious growth targets?
- AI and Energy Updates: Progress in these areas will influence how Tesla is perceived as a diversified tech company.
- Cybertruck Ramp-Up: Details on production capacity and delivery timelines will be closely watched.
Conclusion: Tesla at a Crossroads
Tesla’s Q4 2024 earnings are more than just another report–they’re a crucial checkpoint for a company evolving beyond its origins. While challenges like shrinking margins and increased competition remain, Tesla’s investments in AI, energy, and new products could fuel its long-term success.
For short-term traders, Tesla’s volatility offers trading opportunities. For long-term investors, the company’s ability to innovate and adapt will be key to unlocking future value.
As external disruptions like DeepSeek shake up the tech landscape, Tesla’s earnings call promises to be a must-watch event. Buckle up!
