Tesla’s annual profits have fallen to their lowest level in years as Tesla faces a range of challenges, from increased competition to reputational issues stemming from Chief Executive Elon Musk’s political involvement.
The electric vehicle (EV) company on Wednesday reported a 46% drop in net profit last year to $3.8 billion (3.17 billion euros).
This was the second consecutive year of significant decline.
Profits for the fourth quarter of last year were $840 million, down from $2.1 billion a year earlier.
Total sales for the same year also decreased by approximately 3% to approximately $94.83 billion, marking the company’s first annual sales decline.
lots of challenges
Tesla’s core EV business still accounts for the majority of the company’s current revenue, but it has been under pressure over the past year.
The company faces increasing competition from rivals such as China’s BYD, which is introducing new, lower-priced models.
President Donald Trump’s administration also eliminated tax incentives for electric cars, causing sales to drop in the United States.
Tesla has relied heavily on discounts and incentives to protect sales.
A best-selling low-priced model was also introduced.
“As other manufacturers come out with new models, their products become obsolete, become less and less competitive, and there is overall brand destruction,” Telemetry analyst Sam Abuelsamid told The Associated Press. “Customers are losing customers due to Mr. Musk’s political involvement.”
Tesla says it’s in transition
But Musk is urging investors to focus more on other aspects of the business, such as the company’s plans to introduce fully autonomous robotaxis, rather than car sales.
The company’s energy storage business is also doing well. Last quarter, sales increased 25% to $3.8 billion.
Tesla is benefiting from huge demand from energy-guzzling data centers being built across the United States.
Musk also wants to transform Tesla from an EV maker to an AI company.
To that end, Tesla announced Wednesday that it will invest $2 billion in Musk’s artificial intelligence company xAI.
Investors appear to maintain confidence in Musk
Investors appear to maintain confidence in Mr. Musk, with Tesla stock up 9% over the past year.
Shares rose 2.5% in after-hours trading after Wednesday’s earnings report.
Part of the reason the stock has held up may be because Mr. Musk has promised to remain focused on the company even after entering U.S. politics.
But it’s unclear whether Tesla’s full attention will be on Tesla, as he plans to take his rocket company SpaceX public this year, which could distract him.
Editor: Louis Olofs
