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Tesla’s Profit Drops Sharply

by Tim McBride
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Tesla on Wednesday reported a sharp drop in profit for 2024 as rivals in China, Europe and the United States chipped away at its lead in the market for electric cars. The company made a profit of $2.3 billion in the last three months of 2024, a decline from $7.9 billion a year earlier, but 2023’s profit included a one-time tax benefit of $5.9 billion. Tesla’s operating profit, which excludes that special gain, fell 23 percent in the final three months of the year.

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Sales rose 2 percent to $25.7 billion in the fourth quarter, from $25.2 billion in the same period in 2023. For the full year, profit was $7.1 billion, down from $15 billion a year earlier. Sales rose to $97.7 billion, from $96.8 billion in 2023.

Tesla’s limited range of models and increased competition have led to a decline in its market share in China, Europe, and the United States. The company sells two main models, the Model 3 sedan and Model Y sport utility vehicle, and has not introduced many new vehicles in recent years. In contrast, BYD, a Chinese automaker, offers more than a dozen electric and plug-in hybrid models, and has become Tesla’s biggest challenger outside the United States. Chinese automakers are expected to introduce over 60 models in the second quarter of this year.

Increased competition and Tesla’s lack of new models led to a decline in the company’s market share, with its share of the electric vehicle market in the United States falling to 44 percent in the final quarter of the year, from 51 percent a year earlier. The company’s competition is also growing in the luxury market, with BMW selling nearly as many i5 and i7 luxury sedans as Tesla sold Model S cars in 2024.

Tesla has attempted to boost sales by cutting prices and offering low-interest financing, but this has come at the expense of profit. The company’s shares have soared since November, despite its lackluster financial performance, as investors focus on Elon Musk’s promises to produce self-driving “cybercabs” and the potential for trillions of dollars in revenue. However, some analysts believe the stock is “untethered from fundamentals” and that investors are betting on Musk’s “star power” rather than the company’s financial performance.

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