FALTERING SALES
The latest sales figures are less open to interpretation. Tesla, a company whose profits are overwhelmingly tied to sales of EVs and is priced for incredible growth, recorded a drop in annual vehicle sales for the first time in more than a decade.
Beneath the headline numbers, Tesla sold about 36,000 more vehicles than it produced in the fourth quarter. On one hand, that is helpful in clearing some of the big build-up of unsold vehicles that has marked the past two years, and should offer a cash-flow tailwind from working capital when full results are released later this month.
On the other hand, slower production raises unit costs and clearing inventory means discounting, squeezing margins. When Tesla sold a similar number of vehicles over and above production in the second quarter, underlying gross margin dropped 13 per cent compared with the prior quarter to less than US$6,000 per vehicle, the lowest in at least six years. There was also a notable jump in the proportion of deliveries made under leases.
Returning to the Cybertruck, it is also remarkable that sales of Tesla’s premium-priced models increased by only 3 per cent in the fourth quarter, year over year.
In other words, despite Tesla’s premium lineup having expanded from two models – the Models S and X – to three at the end of 2023, overall sales in that segment are essentially flat. The Cybertruck has cannibalised rather than added to sales of Tesla’s higher-priced EVs.
Tesla’s stock is now down by almost a fifth from its post-election peak. It still sports a forward earnings multiple that is, at about 120 times, more than three times that of Nvidia, to pick a useful benchmark. Tesla may have trouble seeing the future, even just months out, but remains priced to own it nonetheless.
