Tesla announced its Q4 and full-year financial reports for 2022. Financial indicators such as revenue and net profit have achieved good growth. But under the good news, there are also worries. In 2022, Tesla’s total global delivery volume will be 1.31 million vehicles, failing to meet its sales target of 1.5 million vehicles. At the same time, frequent price cuts have also caused Tesla’s business gross profit margin to continue to decline. Data show that in 2022, Tesla’s stock price will fall by nearly 70%, shrinking by more than $700 billion. In addition to the stock price, Musk’s mire in the Twitter acquisition in 2022 has also dissatisfied Tesla’s shareholders. As they say, Tesla now needs a full-time CEO to turn the tide.
Tesla misses its sales target & gross profit declines
The financial report shows that in 2022, Tesla’s total revenue will reach $81.5 billion, a year-on-year increase of 51%. The net profit for the full year of 2022 will be $12.6 billion, a year-on-year increase of 128%. Tesla CEO Musk called 2022 the best year ever in a conference call. But in fact, Tesla is not as completely safe and secure as he describes.
In 2022, Tesla’s total global deliveries will be 1.31 million vehicles, an increase of 40% compared to 2021. But unfortunately, it did not complete the previously set sales target of 1.5 million cars. This made the company lose its position as the world’s number one new energy car seller in 2022. Tesla was actually dethroned by BYD.
After failing to meet its target of 50% annual growth in car sales for two consecutive years, Tesla began to lower its forecast and expects to deliver about 1.8 million cars in 2023. On this basis, the figure is only about 37% higher than in 2022. In the face of sluggish demand, Tesla’s solution is to cut prices.
Multiple price cuts
Taking the Chinese market as an example, on October 24, 2022, Tesla officially announced a price cut in China. Among them, the adjusted price range of the Tesla Model 3 is 265,900 to 349,900 yuan, with a maximum drop of 18,000 yuan (about $2,600). The price range of Model Y after adjustment is 288,900 yuan to 397,900 yuan, with a maximum decrease of 37,000 yuan (about $5,400).
Half a month after the price cut, on November 8, 2022, Tesla officially announced that the limited-time pick-up insurance subsidy program for Tesla’s existing cars has been launched. From November 8th (inclusive) to November 30th (inclusive), if you purchase an existing car and an auto insurance combination from a cooperative insurance agency and complete the pick-up of the car on schedule, the final payment can be reduced by 8,000 yuan (about $1,170). If this happens from December 1st (inclusive) to December 31st (inclusive), the final payment can be reduced by 4,000 yuan (about $589).
In January of this year, just entering 2023, Tesla started the price war mode again. Tesla China announced on its official website that the prices of the Model 3 and Model Y Chinese models on sale will be adjusted. The price cuts for the remaining versions range from 20,000 to 48,000 yuan, setting a new record low for Tesla’sits price in China. The price cut has hugely stimulated sales. According to reports, after the price cut was announced in January this year, it received 30,000 car orders within three days in China.
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Price cuts affect the gross profit margin
While the price cuts seem cool and Tesla gets more orders, the profit of a single car dips. The steady price cuts also have an impact on the gross profit margin of Tesla’s car business. In the fourth quarter of 2022, Tesla Motors’ gross profit margin dropped from 27.9% in the third quarter to 25.9%, compared with 30.6% in the same period in 2021. This has been below 30% for three consecutive quarters. The price cut in January this year will also appear in Tesla’s gross profit margin in the first quarter of this year.
At the same time, frequent price cuts have also rebounded among car buyers. After the price cut was announced in January this year, many Tesla owners formed rights protection groups and gathered in Tesla experience stores in many places. They demand that Tesla compensate owners who recently purchased cars. Some car owners claim that they lose huge cash just after buying the car.
However, Musk seems to have his own considerations for the price cut. Musk emphasizes that improving the affordability of products is the only way to become a multi-million-level electric car brand. “Price changes have a significant impact on the average consumer, and affordability is very important – Tesla’s goal is always to make it affordable for as many people as possible”. He says
Financial report data show that the average selling price of Tesla’s electric vehicles has generally shown a downward trend over the past few years. The average selling price of Tesla’s electric cars has been halved between 2017 and 2022.
Falling stock prices, lawsuits…Musk has more troubles
With sales falling short of expectations, Tesla’s stock price trend in 2022 is not ideal. Data show that in 2022, Tesla’s stock price will fall by nearly 70%, shrinking by more than $700 billion. But it’s not just car sales that affect Tesla’s stock price, but Musk himself. A few days ago, a class action lawsuit against Musk accused of securities fraud was officially opened in California, the United States. The case mainly involved Musk’s 2018 tweet to privatize Tesla, which triggered a violent shock to Tesla’s stock price. The trial is still going on. If found guilty, Musk may have to pay billions of dollars for this incident.
In addition, Musk’s performance in the Twitter acquisition case also caused his personal reputation to plummet. In April 2022, Musk reached a final agreement with Twitter’s board of directors to acquire it at a price of $54.2 per share. The total deal is worth about $44 billion. But shortly after taking over Twitter, Musk started a major layoff. Since Musk took over Twitter, the company has laid off about 80% of its staff, leaving only about 1,300 staff. However, Elon Musk in a tweet debunks this report claiming that Twitter has over 2,300 staff. Due to the loss of staff, it has become more difficult for Twitter to develop new features.
According to YouGov, a month after Musk took over Twitter, there were more negative views on Tesla than positive views. Morning Consult also claims that 38% of respondents had a positive view of Tesla.