Following Elon Musk’s speech, in which he asked investors to understand the dynamics of slowing sales, shares of Tesla Inc (TSLA) plunged to their lowest numbers in eight months. Shares were down nearly 10% as the company failed to beat earnings expectations and warned that its growth will be “considerably lower” than expected this year.

The company’s shares fluctuated around US$180, reaching a level not seen in nearly eight months, since peaking at close to US$184 in May 2023. 

The company made several price cuts throughout last year as it sought to boost sales, which affected its profits. Consequently, managers warned that this strategy’s declining profitability indicates they are approaching the limits of cost reduction in vehicle production.

Unlike before, Tesla did not offer specific growth targets for next year. The company fell short of the 50% annual growth targeted last year despite cutting prices through 2023. Vehicles manufactured grew 38%, and analysts expect a 20% increase this year.

Tesla shares are suffering their worst start to a year. Thursday’s price drop represents the most significant intraday decline in three months.

The electric car maker posted fourth-quarter earnings of $0.71 per share, missing the median estimate of $0.73 per share. On the revenue side, the company posted revenue of about US$25.2 billion, falling short of Wall Street’s estimate of US$25.9 billion.

Tesla plans to build its new car in the second half of 2024

Elon Musk stated that this situation would be temporary. The company will build its next-generation, much more economical vehicle in the second half of this year at its factory in Austin, Texas, and later in Mexico. The electric car brand will also produce that model at another plant in North America.

This could help the company attract the attention of new mass buyers who currently cannot afford to buy the cars, which start at around US$39,000 in the United States. However, the growth rate for 2024 is expected to be significantly lower than last year’s

Recently, Tesla’s limited supply and high prices have made its cars less affordable. The company has seen how competition, especially from companies in China, has been growing in the market. For example, BYD Co. is increasingly positioned as a company that surpasses Tesla as the company that sells more electric cars globally.

Tesla’s Roadmap to Recovery and Growth

As Tesla navigates through a challenging period marked by lower-than-expected earnings, price reductions, and intensified competition, the company remains focused on innovation and market expansion. Despite the recent dip in share prices and a cautious outlook for growth, Tesla’s plans to introduce a more affordable electric vehicle signal a strategic shift towards broadening its customer base and sustaining long-term growth. This move, coupled with Elon Musk’s assurance of temporary setbacks, suggests that Tesla is adapting its strategies to meet the evolving demands of the electric vehicle market and maintain its competitive edge. The coming months will be crucial for Tesla as it balances cost management, market competition, and innovation, aiming to reaffirm its position as a leader in the electric vehicle industry.