Tesla surprised investors on October 23, 2024, by projecting significant sales growth for next year and showcasing remarkable cost efficiency. The company’s forecasts and improved financials led to a 12% surge in Tesla shares, adding approximately $80 billion to its market value.
Sales Growth of 20% to 30% Expected
Elon Musk, Tesla’s CEO, announced that the company anticipates vehicle sales to increase by 20% to 30% in 2025, providing a major boost to investor confidence. Despite concerns over the timeline for its much-anticipated robotaxi, the company’s focus on profitability from electric vehicle (EV) sales reassured stakeholders.
Musk highlighted that Tesla’s profitability, in contrast to other EV makers, stands out: “No EV company is even profitable… So it is notable that Tesla is profitable despite a very challenging automotive environment.”
Cost Efficiency and Margin Growth Impress Investors
Tesla reported that the cost of producing its vehicles dropped to its lowest level, with the cost of goods sold per vehicle reaching $35,100. This improvement contributed to a growth in the company’s third-quarter vehicle sales margin to 17.05%, surpassing Wall Street expectations.
While Tesla’s finance chief, Vaibhav Taneja, cautioned that maintaining this margin in the upcoming quarter would be challenging, the company’s ability to lower production costs has been a positive surprise for investors.
Autonomous Driving and New Vehicles on the Horizon
Musk also indicated that Tesla plans to roll out driverless vehicles for paid rides next year, following regulatory approvals in California and Texas. Tesla’s Full Self-Driving (FSD) software saw a significant rise in adoption after the recent robotaxi event, as the company once again offered FSD free for a month to its customers.
Looking ahead, Tesla plans to launch more affordable EV models in the first half of 2025, continuing its strategy of expanding its vehicle lineup while cutting costs and investing in AI projects.
Tesla Finds a “Sweet Spot” for Profitability
Analysts are optimistic about Tesla’s balance between pricing and production costs. “The improving numbers across the board signal the company may have finally found a nice sweet spot for the pricing-versus-production-costs equation,” said Thomas Monteiro, senior analyst at Investing.com. The results also reduce the urgency for Tesla to introduce a cheaper model immediately, as the company continues to optimise its product mix and pricing strategy.
Challenges Ahead, But Confidence Grows
While Tesla faces potential margin pressure in the final quarter of 2024, its financial performance for the third quarter exceeded expectations, with adjusted earnings of 72 cents per share, beating the estimated 58 cents. Raw material costs for EV batteries have been falling, contributing to Tesla’s improved cost structure.
Tesla’s record-breaking performance in 2024 and optimistic outlook for 2025 have solidified its position as the leader in the EV market, despite increased competition and economic uncertainty.
Source: Reuters
Editor: Andreea Gudin
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