Tesla was a quintessential growth stock, but the “growth” has gone missing.
Tesla (TSLA -4.24%) is one of the world’s largest manufacturers of electric vehicles (EVs), but it faces growing competition and softening demand, which are heavily impacting sales. As a result, Tesla stock is trading 43% below its all-time high from 2021.
Last year, the company slashed its EV prices by an average of 25.1% to counteract those headwinds, and the industry as a whole continued to trim prices in the first quarter of 2024 (according to Cox Automotive). As a result, Tesla’s profitability is plummeting. Its earnings per share shrank 46% year over year during the second quarter of 2024 alone.
Unfortunately, the price cuts haven’t meaningfully boosted sales. Tesla delivered a record 1.8 million EVs during 2023, but its 38% growth rate marked the second consecutive year of deceleration. In the first two quarters of 2024, deliveries actually shrank on a year-over-year basis:
Tesla has a plan to reignite sales growth
China-based BYD recently launched an EV with a sub-$10,000 price tag, which could soon move into Europe where Tesla has a strong presence. As a result, Tesla plans to begin production on a low-cost EV model next year that could be priced at just $25,000. While it won’t be enough to match the BYD model on price, Tesla is banking on its reputation as a premium EV brand to entice lower-income consumers.
But Tesla is more than just an EV company. It’s developing industry-leading autonomous self-driving software, it created a humanoid robot, and it already has a fast-growing solar energy and battery storage business.
It could take years before those segments generate more revenue than Tesla’s EV business, but some analysts already predict they could send Tesla stock soaring.
Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BYD Company and Tesla. The Motley Fool has a disclosure policy.
