How Successful Is Tesla?

Tesla ended Q4 2023 with a net income of $7.9 billion and the full year with $15 billion in profits. While Elon Musk's company more than doubled its earnings between 2021 and 2022, this past year's growth was limited partly due to price reductions. Those reductions aimed to bolster international competitiveness, especially in light of Chinese manufacturer BYD surpassing Tesla in electric vehicle deliveries in 2023. Nevertheless, the car company has effectively turned its fortunes around in the past five years.

In 2020, for example, the automaker broke even for the first time. This was partly due to the increased demand for electric cars after the Model S and Model X, launched in 2012 and 2015, failed to generate significant revenue for Tesla. Diving deeper into the 2020 results, it's clear that the company did not owe its profit to its core business. Although there was a net positive of $721 million at the end of the corresponding year, the sale of climate credits worth almost $1.6 billion was the main driver for its turn to profitability.

Even with Tesla again generating $1.5 billion in 2021 by selling carbon credits, an 87 percent increase in vehicles delivered, cost reductions per car manufactured and an excellent year on the stock market ensured a gross profit margin of just over 25 percent. The automaker maintained this margin in 2022 despite higher raw material prices, likely due in part to a 40 percent increase in vehicles delivered over last year's figures and a nearly $300 million increase in carbon credit sales to about $1.8 billion.

These regulatory credits also contributed significantly to the 2023 results of the company, again netting Tesla roughly $1.8 billion. Another caveat when looking at the company's net results: When factoring out a one-time tax benefit to the tune of $5.9 billion, the automaker generated a non-GAAP income of $10.9 billion. This marks a 23 percent decrease compared to 2022. Gross and operating margins were also down by seven and eight percent, respectively, year over year.

Despite record results bolstered by carbon and tax credits, the prediction of slower growth and growing expenses seems to have scared off investors. At market close on January 24, Tesla's stock stood at $207 per share, having largely recovered from its plunge connected to Musk buying and restructuring Twitter. When markets opened on January 25, the price had plunged to $190.