Tesla Faces Delivery Setback as 2024 Results Disappoint Investors

The moment Tesla TSLA investors have been waiting for has arrived, but it may not bring the relief they anticipated. In its recently released 2024 vehicle delivery report, the electric vehicle (EV) maker announced disappointing numbers. Tesla delivered a total of 1,789,226 vehicles in 2024, which includes 1,704,093 Model 3 and Y units and 85,133 of other models. This reflects a decline from the 1,808,581 units sold in 2023.

During the third-quarter earnings call, CEO Elon Musk had expressed optimism about modest delivery growth for 2024 despite ongoing economic concerns. However, despite offering substantial year-end incentives to increase sales, the company fell short of its annual vehicle delivery targets. Notably, this marks the first time Tesla’s annual delivery numbers have decreased.

In the fourth quarter, deliveries reached 495,570 units. While this constitutes a year-over-year increase of over 2% and sets a new quarterly record, it still fell short of the significant milestone of 500,000 units. Analysts’ predictions, according to StreetAccount, estimated deliveries would hit 504,770.

As a result of these delivery shortfalls, Tesla shares dropped approximately 6% yesterday, closing at $379.28. This adjusted the stock price below $400 for the first time since December 9, 2024, and it is now roughly 20% off its peak of $479.86, reached on December 17, 2024.

Following Donald Trump’s 2024 election victory, it seems that Tesla’s previous surge has slowed. The stock has closed lower in the last five trading sessions.

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Investors now face the decision of whether to buy, hold, or sell TSLA shares. Stock prices are often influenced by sentiment and market emotions, as evidenced by the recent rally following Trump’s presidential win. A pullback was anticipated, and the recent stock drop may reflect an immediate response to the disappointing delivery numbers. The critical question remains: Has Tesla’s long-term investment thesis changed, or is its growth potential intact?

What Lies Ahead for Tesla’s EV Business in 2025?

In the latest earnings call, Musk mentioned his expectation for Tesla’s vehicle sales to grow between 20-30% in 2025. This growth is expected to be driven by strong demand for the Model 3 and Y, the Cybertruck, and a new affordable EV anticipated to launch in the first half of the year. However, persistent challenges from the previous year still linger, including reduced EV demand and rising competition, especially from Chinese manufacturers like BYD Co. Ltd. BYDDY, NIO, Li Auto, and XPeng. At home, traditional automakers such as General Motors GM and Ford F are also expanding their EV offerings.

With Trump back in office, new factors will come into play. A potential rollback of the $7,500 EV tax credit, part of the Biden administration’s initiatives, could restrict demand for EVs in the U.S. While some view this as a hindrance for Tesla, others propose that the company’s scale and strong brand loyalty lessen its reliance on such incentives compared to competitors. Musk himself acknowledged that any policy changes could have short-term effects on Tesla but would be more detrimental to its rivals.

Moreover, Tesla’s competitive advantage stretches beyond just vehicle sales. Its extensive North American Charging Standard (NACS) network, with over 60,000 supercharger connectors worldwide, is emerging as a major revenue source. The adoption of Tesla’s charging standard by major automakers like GM and Ford underscores its market strength and positions Tesla for future growth.

As the market landscape shifts, will Tesla retain its lead in the global EV contest? In 2024, BYDDY reported delivering 1.76 million battery-powered EVs, closely trailing Tesla’s 1.789 million units. Both Tesla and BYDDY will compete fiercely for the top spot in EV sales for 2025.

Strong Performance from TSLA’s Energy Storage Business

Tesla’s Energy Generation and Storage division remains a significant growth engine. This segment has achieved remarkable success, with revenues soaring at a triple-digit compound annual growth rate over the last three years. The revenue generated from the Megapack and similar products has the highest profit margins in Tesla’s portfolio. In the fourth quarter of 2024, Tesla deployed 11.0 GWh of energy storage products, representing a staggering 243% year-over-year increase. Total energy storage deployments for 2024 reached 31.4 GWh, up from 14.7 GWh in 2023. The expansion of the Megapack factory is key to meeting high demand and capitalizing on the global energy transition.

The Importance of Progress in Autonomous Vehicles

Another important focus for Tesla is its ambitions in the autonomous vehicle (AV) sector. Investors are particularly excited about the plans to enhance Full Self-Driving (FSD) capabilities and launch a dedicated robotaxi fleet. With Musk co-leading the newly established Department of Government Efficiency under Trump, simplified regulations for AV deployment could serve as a significant advantage for Tesla.

Currently, Tesla’s FSD operates under supervision, but the company hopes to transition to an unsupervised mode in select states like Texas and California as early as next year. Musk also plans to introduce Tesla’s ride-hailing robotaxi service in these states by 2025, pending regulatory approval. If the new administration streamlines AV regulations, Tesla’s robotaxi ambitions could realize substantial progress, potentially transforming its long-term growth narrative.

Assessing TSLA’s Valuation

From a valuation perspective, Tesla may appear overvalued at the moment. The company currently trades at a price/sales ratio of 12.15, which surpasses both industry averages and its own five-year average.

Nevertheless, Tesla’s engagement in rapidly expanding sectors—including solar and clean energy, EV charging, and its FSD technology—remains an important factor. Generally, tech companies command higher valuations than traditional automakers, and Tesla straddles the boundary between both sectors.

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Should You Buy, Hold, or Sell TSLA Now?

Tesla’s miss in delivery numbers for 2024 has sparked some immediate bearish sentiment. Currently, the stock is trading below its 20-day moving average, and more declines are possible before the earnings report on January 29. Investors will be closely watching for updates from Musk on the outlook for 2025 delivery numbers, advancements in the autonomous vehicle sector, and important metrics like profit margins.