The Mercury News - (archived: https://archive.ph/mToHz ) Opinion: Tesla’s awful numbers put Musk back into campaign mode

Very little looks good on EV company’s balance sheet, but Tesla chairman tries every way possible to spark excitement

By Liam Denning
PUBLISHED: February 11, 2025 at 5:00 AM PST



It’s a good thing for Tesla that its chief executive has cozied up to the U.S. president, because the company’s latest numbers are awful.

Tesla Inc. missed earnings estimates for the fourth quarter. The bigger issue is that the miss would have been even worse if Tesla hadn’t pulled a couple of levers. Another big slug of greenhouse gas credit sales combined with an unusually large dollop of “other income,” due mostly to an accounting change related to Bitcoin holdings, added up to $1.5 billion. Tax-adjusted, that’s half of Tesla’s entire earnings for the quarter right there. These earnings aren’t just weak but low quality, too.

Tesla touted a record quarter in terms of vehicle and battery sales. Somehow that translated to the opposite for its financials. The closely watched metric of automotive margin with emissions credit sales stripped out hit its lowest since at least 2018, at 13.6%. Average revenue per vehicle sold, excluding leases and credits, dropped below $40,000 and gross margin on that basis slumped to about $5,100; again, the lowest since at least 2018.

In an oblique way, Tesla spelled out the problem, albeit framed as a win. It noted high up in its most recent earnings report that it reduced its average cost of vehicle production to the lowest level ever at under $35,000 apiece. That it did. But this draws attention to an underlying problem: Tesla’s production costs are declining in tiny increments. The average drop per quarter over the past two years is less than 2%. This makes margins vulnerable in a price war — which is exactly what has happened with EVs amid slowing sales growth in the United States and intense competition in China. Tesla’s ageing model lineup compounds the issue. The result is falling prices twinned with stubborn costs and, therefore, dramatically lower margins. Consider that Tesla sold 36% more vehicles in 2024 than it did two years before, as well as far more battery capacity, and yet operating profit fell by about half.

These results are even more of a gut punch when one recalls the previousearnings call. Back then, Tesla was scrambling to recover from the flop that was its robotaxi unveiling event. Tesla reported better-than-expected results soon after, albeit more of a bottoming out than a rebound. But Elon Musk shifted the narrative completely by touting big growth in fourth-quarter vehicle sales and growth of another 20-30% in 2025. Tesla’s value soared by more than a fifth the next day. As it turned out, sales missed that guidance in the fourth quarter and, curiously, that 2025 target wasn’t repeated with the latest results — probably a good thing given President Donald Trump’s anti-EV executive orders.

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