To The Moon

After the US stock market closed yesterday, $Tesla Motors(TSLA)$ released its Q4 earnings, and they were pretty dismal!

Compared with analyst expectations, both revenue and earnings were worse than expected:

After the earnings release, Tesla shares fell 6% after hours:

Specifically, Tesla's revenue was $25.167 billion in the fourth quarter, an increase of only 3.5% year-on-year, the lowest growth rate in three years, and less than the $25.87 billion expected by analysts:

The slowdown in revenue growth is due to the worsening competition in the electric vehicle market. In terms of sales volume, Tesla delivered 484,507 vehicles in the fourth quarter, representing a year-on-year increase of 19.5% and a record high for a single quarter.

However, the increase in sales volume was mainly achieved by price cuts. In the fourth quarter, the average revenue per vehicle for Tesla was $445,000, a 15.4% decrease compared to the same period in 2022.

As a result, the automotive revenue for Tesla in the fourth quarter was only $21.56 billion, representing a year-on-year increase of only 1.2%.

Besides the automotive business, energy revenue also saw a significant slowdown in the fourth quarter, with revenue of $1.438 billion, up just 9.8% from a year earlier, and management said high interest rates were holding back growth in the business.

The service business revenue in the fourth quarter was $2.166 billion, up 27.3% year on year, and the growth rate also slowed down.

Although Tesla claims that energy business growth will exceed automotive growth in 2024, this segment has a narrow moat and is valued very low in the capital market, which is not the future of Tesla.

The intensified competition in the automotive market not only reduces revenue growth but also erodes profitability. In the fourth quarter, Tesla's overall gross profit margin was 17.6%, down 6% compared to the same period in 2022.

By business, automotive gross profit margin in the fourth quarter was 18.9%, a sharp decline of 7% compared with the same period in 2022. The gross profit margin of the service business was 2.7%, which was pitifully low. Energy is the most profitable business with a gross margin of 21.8%, but it simply can't support Tesla's nearly 80 times earnings:

Besides the decline in gross profit margins, Tesla's fourth-quarter operating expenses also increased. The sales and administrative expenses ratio increased from 4.2% in the same period of 2022 to 5.1%, while the R&D expenses ratio increased from 3.3% to 4.3%.

The increase in operating expenses is mainly due to Tesla's increased promotional efforts and the relatively rigid cost of R&D, as both autonomous driving and new models require continuous investment. In this situation, with revenue growth slowing down, the operating expenses ratio may also increase.

Given the decline in gross profit margins and the increase in operating expenses, Tesla's fourth-quarter operating profit margin was 8.2%, a significant decrease compared to the same period in 2022, but a slight improvement from the previous quarter.

To make matters worse, management expects automotive revenue growth in 2024 to be lower than that in 2023, and they didn't mention any targets for 2024. Although Musk believes that the mass-market vehicle launched in the second half of 2025 will bring revolutionary changes and drive Tesla's growth, that timeline is still a bit too far away. Considering the production timeline for vehicles, it may take until 2026 for Tesla to return to high growth.

As for the robot business, it's not the time for large-scale applications yet. Neither the capabilities nor the costs of robots are suitable for large-scale applications, so they can only provide imagination in the context of AI hype!

The same goes for autonomous driving technology. Although no one doubts Tesla's leading position in this field, converting technological advantages into revenue still faces the risk of fierce automotive competition. They must sell cars first, and then they can monetize the technology. But the competition in the new energy vehicle market in 2024 will definitely be more intense than that in 2023. If there is no generational difference between autonomous driving technology and other automakers, Tesla's pride FSD may not be able to lead them out of the woods!

In the end, new energy vehicles are still cars, and they still can't escape from the fate of fierce competition in the fuel vehicle market.

Finally, what's concerning is Tesla's valuation. Currently, the market capitalization is as high as 61 times earnings, which is difficult to sustain when compared with current growth rates and expectations for 2024.