Tesla TSLA-Q CEO Elon Musk said on Wednesday that he expects 20% to 30% vehicle growth next year, sending the company’s shares up 11% in post-market trading.
The company’s quarterly report earlier in the day reassured Wall Street that the EV maker was improving at its core business of making and selling electric vehicles, reducing concerns about when it could produce new models including a robotaxi.
The company handily beat third-quarter profit expectations and investors welcomed a forecast for “slight growth” in auto deliveries this year, surpassing the 1.8 million vehicles it delivered in 2023.
Shares of Tesla surged 11% during the company’s quarterly conference call after the bell, adding about $70 billion in stock market value. The stock dropped 2% during Wednesday’s trading session.
“Despite sustained macroeconomic headwinds and others pulling back on EV investments, we remain focused on expanding our vehicle and energy product lineup, reducing costs and making critical investments in AI projects and production capacity,” Tesla said in a statement. Musk has been focused on transforming Tesla from a pure-play EV maker to a leading force in autonomous driving and artificial intelligence. But the company’s robotaxi event earlier this month left investors desiring more details on how the company plans to do so. Investors slammed shares the next day, punishing Tesla for the conspicuous absence of a concrete business plan. This month Tesla’s stock has tumbled nearly 20% and Wednesday’s report card and forecast will offer shareholders some respite.
“The improving numbers across the board signal the company may have finally found a nice sweet spot for the pricing-versus-production-costs equation, which has been the main issue for stock performance since last year,” said Thomas Monteiro, senior analyst at Investing.com. “The report also diminishes the urgency for a cheaper model.”
The EV giant said that the labour and material costs of making vehicles, known as the cost of goods sold per vehicle, dropped to its lowest level ever, about $35,100. Adjusted profit of 72 cents per share in the third quarter beat an average estimate of 58 cents.
Prices of raw materials used to make EV batteries have been falling and Tesla has said its costs will decline as a result this year, with the effect diminishing over time.
Its third-quarter profit margin from vehicle sales, excluding regulatory credits, grew to 17.05% from 14.6% in the prior three-month period, according to Reuters calculations.
Wall Street had expected the figure to be 14.9%, according to 24 analysts polled by Visible Alpha.
Incentives
Tesla has already delivered 1.29 million vehicles in the first nine months of this year. It needs to hand over another 514,925 vehicles to beat last year’s record.
The company said earlier this month that its September-quarter deliveries grew by more than 6% on a year-over-year basis, marking the first quarter of growth after a decline in the January-June period.
On Wednesday, it said it recognized its second-highest quarter of regulatory credit revenue. This metric was up 33% year-over-year to $739 million, but down from $890 million in the second quarter.
The company slashed prices last year, leading to a sharp decline in profit margins. This spring, it shifted its strategy to offering cheaper financing options and discounts that analysts have said could slow its margin bleed over the coming quarters.
“The fear going into results was that the huge incentives effort to push volumes into the tough EV market would materially dent margins – that doesn’t look the be the case,” said Matt Britzman, a senior equity analyst at Hargreaves Lansdown who also personally owns Tesla shares.
Revenue for the July-September quarter was $25.18 billion, compared with estimates of $25.37 billion, according to data compiled by LSEG. It reported sales of $23.35 billion in the corresponding quarter of 2023.