Tesla Faces Sales Growth Setback as Elon Musk Acknowledges Chinese EV Threat
In a surprising turn of events, Tesla, once the leader in global electric vehicle (EV) sales, faced a setback as Chinese automaker BYD claimed the top spot in the fourth quarter of 2023. The competition from Chinese electric car brands has led Tesla to revise its ambitious sales targets, causing a 7.5% drop in Tesla shares during premarket trade on Thursday.
Tesla had been slashing prices for over a year to counter increased competition, resulting in a 38% growth in deliveries for 2023 compared to the previous year. However, this fell short of Tesla’s earlier target of achieving a 50% annual growth rate over several years. On Wednesday, Tesla cautioned that its “growth rate may be notably lower” in 2024 than the previous year.
Elon Musk, Tesla’s CEO, acknowledged the formidable competition posed by Chinese carmakers, stating that they are “the most competitive car companies in the world” and are poised for significant success beyond China. Musk went on to express his belief that without trade barriers, Chinese EV brands could “demolish most other car companies in the world.”
The rising threat from Chinese automakers, including BYD, has triggered an anti-dumping investigation by European Union officials, potentially leading to higher tariffs. Musk, who previously dismissed Chinese EV brands, now sees them as an existential threat to global car manufacturers.
Tesla’s growth target has been a driving force behind its soaring stock value, making it the most valuable automaker globally despite delivering fewer vehicles than more established competitors. The company’s adjusted earnings of 71 cents per share, slightly below analysts’ forecast of 74 cents per share, marked a 40% decline from the previous year.
As part of a disappointing earnings report, Tesla revealed a slower growth rate in 2024, attributing it to teams working on the launch of the next-generation vehicle. However, details about this new vehicle, expected to be a lower-priced model, have not been unveiled. The company cautioned that the ramp-up for its recent vehicle, the Cybertruck pickup, would be longer due to manufacturing complexity.
The earnings report marked the second consecutive quarter where Tesla fell short of earnings forecasts, signaling a deviation from a series of better-than-expected reports since the start of 2021. With revenue at $25.2 billion, up only 3% from the previous year and below forecasts of $25.6 billion, Tesla faces challenges in sustaining its growth momentum amidst intensifying global competition and evolving market dynamics.
