Tesla Reports Significant Profit Decline Amid Rising Competition

Tesla's profit has sharply decreased amidst intensifying competition in the electric vehicle market, despite a slight increase in sales revenue. The company’s reliance on its two primary models and strategic price cuts has undermined profitability.

Tesla announced a notable decline in profits for 2024, reporting a $2.3 billion gain in the last quarter of the year compared to $7.9 billion in the same period in 2023. Notably, the previous year's profit was bolstered by a one-time tax benefit amounting to $5.9 billion, thus making the current profit drop even more significant. Excluding special gains, Tesla’s operating profit experienced a 23 percent drop in the recent quarter, highlighting the pressures the company is facing.

Despite these challenges, Tesla's sales increased slightly, rising 2 percent to $25.7 billion in the fourth quarter. For the entire year, the auto manufacturer reported profits of $7.1 billion, a steep drop from the $15 billion recorded in 2023. The company's total sales reached $97.7 billion, marking a growth from $96.8 billion the prior year.

In response to dwindling profits, Tesla has engaged in aggressive pricing strategies, including cutting prices and providing low-interest financing to boost sales. However, these tactics have negatively affected the company's bottom line. Furthermore, while the company has diversified by selling energy storage systems for utilities and home use, it continues to rely heavily on its Model 3 sedan and Model Y SUV for the majority of its vehicle sales.

As Tesla confronts stiff competition from an expanding array of electric vehicle options from rivals in China, Europe, and the United States, it may need to accelerate the development and introduction of new models to maintain its leading position in the market.