Tesla looks to make a strong statement with an expected 20 to 30-percent growth in vehicle sales next year. In a call with analysts, Elon Musk reassured investors that the company remains focused on making its electric vehicle (EV) sales profitable, despite speculation around the launch of a robotaxi.
The announcement sent Tesla shares up 12 percent in after-hours trading on Wednesday, boosting the company's market value by around $80 billion.
Cutting costs and boosting margins
One of the reasons investors were reassured was the lowering of vehicle manufacturing costs, a factor that helps keep Tesla's profit margins at the top of the automotive industry. Although the unveiling of the robotaxi on October 10 didn't wow the markets, Musk reminded investors that Tesla is one of the few companies in the EV industry to be profitable, an achievement all the more notable in a difficult automotive environment.
Autonomous vehicles for 2025
Musk also announced that Tesla will begin deploying self-driving pay-as-you-go vehicles next year, after receiving regulatory approval in California and Texas. Adoption of Full Self-Driving (FSD), a supervised autonomous driving software feature, increased significantly after that approval, with a new promotion offering FSD free for a month for existing customers, the second time this year.
Profitability up despite challenges
In the third quarter, Tesla posted a profit margin of 17.05% on vehicle sales, excluding regulatory credits, compared with 14.6% in the previous quarter. Although profitability was better than expected by analysts, CFO Vaibhav Taneja warned that maintaining these margins in the fourth quarter would be “challenging”. The cost of production per vehicle reached its lowest level ever at around $35,100, and adjusted earnings of 72 cents per share exceeded estimates.
A well-balanced pricing strategy
Tesla has found a balance between prices and production costs, according to analysts. Despite lower raw material prices, Tesla has maintained flexibility by offering attractive financing options to stimulate demand. With 1.29 million vehicles already delivered this year, Tesla only needs to deliver 514,925 more to beat last year's record.
Controlled growth
Third-quarter results have allayed fears that Tesla's strategy of massive incentives would put too much pressure on margins. With solid sales and margins, the company looks well positioned for continued growth, even in an increasingly competitive EV market.
