"Price war" impact on Tesla's profits, the first decline in 7 years! After-hours trading fell more than 5%, warning of a significant slowdown in sales in 2024.

According to Zhitong App, Tesla announced its financial performance for the fourth quarter of 2023 after the U.S. stock market closed on Wednesday. Due to lower-than-expected revenue and profit, the fourth-quarter profit dropped by nearly 40%, and the annual performance experienced the first annual profit decline since 2017. Tesla also warned that sales growth in 2024 will slow down. As of the time of writing, Tesla's stock fell more than 5% after the U.S. stock market closed on Wednesday.

The financial report shows that Tesla's total revenue in Q4 increased by 3% YoY to $25.167 billion, falling short of the market's expectation of $25.6 billion. In terms of business segments, automotive revenue was $21.563 billion, with only a 1% YoY growth. The sluggish growth is partly due to the significant price reduction in the second half of last year, which led to a decrease in the average selling price of vehicles globally. Energy generation and storage revenue was $1.483 billion, a YoY increase of 10%. Service and other revenue was $2.166 billion, a YoY increase of 27%.

Under the non-GAAP accounting standards, net profit attributable to common stockholders was $2.485 billion, a YoY decrease of 39%. Diluted earnings per share were $0.71, lower than the market's expectation of $0.74 and the $1.19 in the same period last year. Adjusted EBITDA was $3.953 billion, a YoY decrease of 27%. Tesla attributed the profit decline to the decrease in the average selling price of its vehicles and the increase in operating expenses driven by artificial intelligence and other research and development projects.

The gross margin was 17.6%, a decrease of 612 basis points from the same period last year, the lowest level since 2019, and lower than the market's expectation of 18.1% and Q3's 17.9%. The operating margin was 8.2%, a decrease of 784 basis points from the same period last year, higher than Q3's 7.6%.

Full-year revenue in 2023 increased by 19% YoY to $96.773 billion, reaching a record high. Among them, automotive revenue for the full year reached $82.419 billion, a YoY increase of 15%. Adjusted EBITDA was $16.631 billion, a YoY decrease of 13%. Net profit attributable to common stockholders under non-GAAP accounting standards was $10.882 billion, a YoY decrease of 23%. Diluted earnings per share were $3.12, a 23% decrease from the record $4.07 in 2022.

Tesla delivered 1.808 million vehicles in 2023, a YoY increase of 38%, with a record-breaking 484,500 vehicles delivered in the fourth quarter. This means that the company's annualized delivery growth rate over the past five years has reached 127%. Tesla did not disclose its delivery target for 2024, which is unusual because Tesla has always set its average annual delivery growth rate at 50%.

In the financial report, Tesla stated that the company is currently between two major growth waves and indicated that the delivery growth rate in 2024 may be significantly lower than that in 2023. Tesla stated that its first wave of growth began with the global expansion of the Model 3/Y platform, and it believes that the next wave of growth will be led by the global expansion of the next-generation vehicle platform.

Tesla stated that it will continue to develop next-generation models, with multiple teams conducting research and development in Texas, USA, and launching next-generation platform products at the state's Gigafactory. Tesla stated that the new models will help refresh Tesla's product line and may attract a new wave of customers. Tesla CEO Elon Musk stated that the next-generation models will be "low-cost" and are expected to start production in late 2025.

In addition, Tesla started delivering its electric pickup truck, the Cybertruck, to customers in Q4. The company stated in its earnings report, "Considering the manufacturing complexity of the Cybertruck, the ramp-up process for Cybertruck production is expected to be longer than other models." Tesla stated that the current production capacity for the Cybertruck is over 125,000 vehicles per year, but the company did not disclose how many Cybertrucks have been sold. Musk warned in October last year that the Cybertruck may not generate significant cash flow within one to 18 months.

Tesla confirmed the launch of a new version of its advanced driver-assistance software, called Full Self-Driving (FSD) Beta or FSD Testing Option, during its shareholder presentation. However, this software does not enable Tesla vehicles to achieve full autonomous driving as they still require a focused driver behind the wheel. As of the end of 2023, Tesla has provided 54,892 Supercharger connectors at 5,952 sites worldwide for drivers.

Meanwhile, labor costs for Tesla in the United States are rising. In order to make its wages competitive with other automakers such as General Motors, Ford, and Stellantis, Tesla recently increased wages for many of its hourly workers in the United States.