On October 24, 2024, Tesla released its 2024 Q3 financial results. In the first three quarters of 2024, Tesla's revenue was $72 billion, a year-on-year increase of 0.5%; net profit was $4.82 billion, a year-on-year decrease of 31.4%; deliveries were 1.294 million vehicles, a year-on-year decrease of 2.3%.
Despite such dismal performance, it is being praised as &#34;amazing&#34; and &#34;exceeding expectations&#34;. If a 30% decrease in net profit is considered &#34;amazing&#34;, what about Tesla's 123% net profit growth in 2022? And Nvidia's 282% net profit growth in the first half of 2024?
Calling it &#34;exceeding expectations&#34; is even more of a joke! With a 30% decrease in net profit in the first three quarters of 2024, if expectations for Tesla are even worse than this, why give it a P/E ratio of 68 times?
Slowing delivery growth is hard to reverse
The peak growth rate of Tesla's sales was 138% in 2018, and although it has since declined, it has always remained in the &#34;double digits&#34; until 2024:
<blockquote>
In 2017, Tesla delivered over 100,000 vehicles for the first time, a year-on-year increase of 36%;
In 2018, deliveries reached 246,000 vehicles, a year-on-year increase of 138%;
Growth rates slowed in 2019 and 2020, with 936,000 deliveries in 2021, an 87% year-on-year increase;
In 2022, deliveries reached 1.314 million vehicles, with growth slowing to 40%;
In 2023, deliveries reached 1.81 million vehicles, maintaining a growth rate of 38%;
In 2024 Q1 and Q2, Tesla experienced negative growth, with quarterly deliveries decreasing by 8.5% and 4.8% year-on-year respectively; Q3 deliveries of 463,000 vehicles increased by 6.4% year-on-year.
In the first three quarters of 2024, a total of 1.294 million vehicles were delivered, a year-on-year decrease of 2.3%.
</blockquote>
Worldwide, the growth in sales of pure electric vehicles is slowing down. For example, BYD:
<blockquote>
In 2021, BYD delivered 721,000 vehicles, a year-on-year increase of 83%.
In 2022, BYD delivered 1.8 million vehicles, a year-on-year increase of 150%.
In 2023, BYD delivered 3.02 million vehicles, a year-on-year increase of 68%.
In the first three quarters of 2024, BYD continued to set new records, with Q3 deliveries of 1.135 million vehicles, a 37.7% year-on-year increase
In the first three quarters of 2024, BYD delivered a total of 2.75 million vehicles, an increase of 32.1% year-on-year. Among them, pure electric vehicle deliveries reached 1.17 million, an increase of 11.6% year-on-year; plug-in hybrid vehicle deliveries reached 1.566 million, an increase of 53.3% year-on-year.
</blockquote>
One of the key reasons restricting the growth of pure electric vehicles is the insufficient construction of charging facilities to keep up with the expansion of new energy vehicles. Plug-in hybrid vehicles, without range anxiety, are gaining popularity and squeezing the market share of traditional fuel vehicles. BYD has become the biggest beneficiary, with plug-in hybrid vehicle growth rates of 14.5%, 59.9%, and 75.6% in the first three quarters of 2024!
In addition to the slow growth in Tesla deliveries, another reason is the untimely product iteration and consumer aesthetic fatigue.
The Model 3, which was launched in 2016, was only updated in 2023. The launch date of the Model 2 has been postponed to the first half of 2025.
According to foreign media reports, this entry-level vehicle is 15% smaller in size than the Model 3, uses &#34;blade batteries,&#34; is less than 4 meters in length, and is priced at $25,000. With the size of Wuling and the price of the Han EV, the outlook in the Chinese market is not optimistic.
&#34;Price for Volume&#34; Strategy Fails
When a company has strong bargaining power due to technological and brand advantages, it can set prices higher to prioritize profit, known as &#34;skimming.&#34; Alternatively, it can set prices lower to expand market share, known as &#34;price for volume.&#34;
After the delivery of the Model 3 in 2017, Tesla began to focus on &#34;price for volume&#34; with significant results:
<ul>
<li>In 2018, 146,000 Model 3s and 99,000 Model S/X were delivered, totaling 245,000 vehicles. The total vehicle sales revenue and cost were $17.6 billion and $13.7 billion, with a per-vehicle price and cost of $72,000 and $56,000, and a gross profit margin of 22.4%.</li>
<li>From 2019 to 2021, Tesla's delivery prices decreased unilaterally, yet the overall vehicle sales gross profit margin reached 26.5% in 2021.</li>
<li>In 2022, Tesla's overall vehicle sales gross profit margin began to decline, from 29.7% in Q1 to 25.7% in Q2, and further to 23.8% in Q4.</li>
<li>In January 2023, Tesla initiated a &#34;price war,&#34; with the Q1 gross profit margin dropping to 18.3%, 11.3 percentage points lower than Q1 2022. The full-year 2023 vehicle sales gross profit margin was 17.1%, 9.2 percentage points lower than 2022.</li>
</ul>
As of 2024, the overall vehicle sales gross profit margin remains low, with an average of 15.3% in the first three quarters, while sales have decreased by 2.3%. # Failure of Price for Volume Strategy#
![](https://img.huxiucdn.com/article/content/202410/28/221055184259.png?
Vehicle sales are the cornerstone of Tesla, with sluggish sales and declining prices, revenue immediately &#34;stalling&#34;:
<blockquote>
In 2021, total revenue was $54 billion, a year-on-year increase of 70.7%;
In 2022, total revenue was $81 billion, a year-on-year increase of 51.4%;
In Q2 of 2023, revenue was $25 billion, a year-on-year increase of 47.2%; the growth rate plummeted in Q3 to only 8.8%; and in Q4, the growth rate dropped further to 3.5%;
In the first three quarters of 2024, revenue growth rates were -8.7%, 2.3%, and 7.8% respectively. The total revenue for the first three quarters was $72 billion, with growth rates nearly at zero.
</blockquote>

With prices falling and sales rising, when economies of scale outweigh concessions, the company's gross profit margin rises instead of falling. This is the &#34;most beautiful price war&#34;. Reflected in the financial report, revenue and gross profit margin both increase, and the gross profit amount skyrockets exponentially. Tesla has had such good times, but unfortunately, they were short-lived.
Other &#34;financial sources&#34; contribute 40% of gross profit
In addition to vehicle sales, Tesla also has financial sources such as car leasing, car services, energy, and carbon emission quota sales.
<ol>
<li>Car services support revenue</li>
</ol>
Car services include paid charging, non-warranty after-sales, used cars, car insurance, and other businesses. In recent years, the proportion of revenue and gross profit margin of car services has steadily increased, making it the best-performing business under Tesla:
<blockquote>
In 2021, car service revenue was $3.8 billion, accounting for 8% of revenue, with a gross loss rate of 2.7%;
In 2022, car service revenue was $6.1 billion, accounting for 8.5% of revenue, with a gross profit margin of 3.5%;
In 2023, car service revenue was $8.32 billion, accounting for 10.1% of revenue, with the gross profit margin increasing to 5.9%;
In the first three quarters of 2024, the proportion of car services in revenue remained above 10%, with a gross profit margin reaching 8.8% in the third quarter.
</blockquote>

Car services are a natural extension of the vehicle sales business, with revenue growing in sync with the number of vehicles in service.
As of the end of September 2024, Tesla's fleet exceeded 7 million, with service revenue steadily growing, demonstrating economies of scale and significant profit improvement
2) Car rental, energy, and quota sales contribute to profits
Although the revenue from car rental and energy storage businesses is small, the gross profit margin often reaches 30% to 40%, and selling carbon emission quotas is a risk-free profit (revenue equals profit).
Although Tesla's sideline income is much lower than vehicle sales, its contribution to gross profit is crucial. Taking 2023 as an example:
<blockquote>
Car rental revenue of $2.12 billion, cost of $1.27 billion; gross profit of $850 million, gross profit margin of 40.2%;
Energy business revenue of $6.035 billion, cost of $4.894 billion; gross profit of $1.14 billion, gross profit margin of 18.9%;
Sale of carbon emission quotas of $1.79 billion, gross profit margin of 100%;
Service revenue of $8.32 billion, cost of $7.83 billion; gross profit of $490 million, gross profit margin of 5.9%;
Total non-vehicle sales revenue for the year was $18.3 billion, accounting for 18.9% of total revenue; the gross profit of the four businesses totaled $4.27 billion, accounting for 23.4% of the total gross profit;
</blockquote>

In the first three quarters of 2024, non-vehicle sales revenue reached $18.16 billion, accounting for 25.2% of total revenue; gross profit of $5.05 billion, accounting for 38% of the total gross profit!
Making less money from selling cars, relying on post-sales services, maintenance, insurance, and used cars to make money, most traditional fuel vehicle companies are doing the same. Tesla is now joining their ranks.
<ol>
<li>Still a high-quality stock</li>
</ol>
Using the blue line to represent gross profit, and the colored stacked bars to represent expenses. Only when the blue color overwhelms the colored bars can a company achieve operating profit. The further the blue is from the colored bars, the better the quality of the stock.
Due to the drag from vehicle sales business, Tesla's gross profit margin dropped to 18.2% in 2023.
In the first three quarters of 2024, due to the outstanding performance of other businesses, the gross profit margin increased each quarter: 17.4% in Q1, increased to 18% in Q2, and reached 19.8% in Q3.

Although revenue growth is slowing down and net profit is declining, Tesla is still a high-quality stock, but valuation should be approached with caution.
What supports the valuation
Let's use the process of elimination:
<ul>
<li>Pickup trucks</li>
</ul>
The Cybertruck released in 2019 only began limited deliveries in November 2023, &#34;squeezing in&#34; with the Model S and Model X disclosures
From January to September 2024, a total of 61,000 vehicles were delivered excluding Model 3/Y, with Cybertruck accounting for about one-third. Given Americans' love for pickup trucks, Cybertruck is considered to have &#34;great potential.&#34;
<ul>
<li>Model 2</li>
</ul>
In September 2020, Musk claimed to &#34;launch within three years&#34; the Model 2. After several delays, it is planned to be launched in the first half of 2025, but it remains to be seen if there will be further delays. It is touted as having a &#34;clear new model plan.&#34;
<ul>
<li>&#34;Revolutionary&#34; 4680 Battery</li>
</ul>
The 4680 battery released on &#34;Battery Day&#34; in 2020 was seen as a &#34;revolution.&#34; In September 2024, Tesla announced the production of the 1 billionth 4680 battery, with 50 million produced in the past 3 months. Calculated at 960 batteries per vehicle, the 4680 battery can meet the loading demand of 4,300 vehicles per week. This is equivalent to 2% of China's new energy vehicle sales in the first week of October 2024. Currently, this level of production is far from being considered a &#34;revolution.&#34;
<ul>
<li>Autopilot</li>
</ul>
It is said that Tesla's market value is higher than BYD mainly because of Autopilot. Tesla's Autopilot is worth at least $700 billion, approximately 42 times that of Huawei's Autopilot.
Tesla recognizes FSD (Full Self-Driving) subscription fees as deferred income in vehicle sales.
In 2023, $469 million was recognized from deferred income at the end of 2022, accounting for 0.6% of total vehicle sales revenue.
In 2024, revenue recognized from deferred income at the end of 2023 will be $926 million. Shenzhen expects revenue in 2024 to be $16.2 billion, approximately $2.3 billion.
In the first three quarters of 2024, $711 million was actually recognized, accounting for 1.3% of total vehicle sales revenue.
In June 2024, Tesla announced a reduction in the optional FSD price in the U.S. market from $12,000 to $8,000. Prior to this, the subscription price had already been reduced from $199 per month to $99.
It is expected that by the end of 2024, Tesla's fleet will increase by 33% compared to the end of 2023. Considering the extent of the FSD price reduction, deferred income at the end of the year may not exceed that of 2023. In this case, the confirmed FSD revenue in 2025 is also unlikely to break through and will still hover around 1% of revenue.
With a fleet of over 7 million, Autopilot revenue is less than half of Shenzhen's expectations, and it doesn't even cover the R&amp;D expenses.
Even when these four items are combined, they are not enough to support Tesla's current market value. Among the seven major U.S. tech giants, Tesla has the largest bubble.

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TSLA

Tesla's performance in Q3 2024 showed revenue of $72 billion, a year-on-year increase of 0.5%; net profit of $4.82 billion, a year-on-year decrease of 31.4%; and deliveries of 1.294 million vehicles, a year-on-year decrease of 2.3%. Despite the poor performance, it is still considered "amazing". In comparison, Nvidia's net profit increased by 282%. Tesla's delivery growth slowed down, with negative growth in Q1 and Q2 of 2024, and deliveries of 463,000 vehicles in Q3, a year-on-year increase of 6.4%. BYD continued to achieve record-high deliveries during the same period, demonstrating intensified market competition

- Tesla reported Q3 2024 results, with revenue of $72 billion, a 0.5% year-on-year increase, and a net profit of $4.82 billion, down 31.4%.  
- Deliveries totaled 1.294 million vehicles, a 2.3% decline, raising concerns about the company's growth potential amid increasing competition from rivals like BYD.  
- Factors contributing to Tesla's struggles include inadequate product updates, declining profit margins, and challenges in charging infrastructure, leading to a cautious outlook on its valuation.

Stop hyping Tesla