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Elon Musk promised a rebound in Tesla sales this year after a disappointing 2024, with leaps forward in artificial intelligence that will enable unsupervised, self-driving cars on Texas roads by June.
His optimism contrasted with disappointing fourth-quarter results, in which profit and revenue missed estimates, following Tesla’s disclosure earlier this month of its first annual decline in electric vehicle sales in more than a decade.
Musk on Wednesday said Tesla will launch a driverless ride-hailing service in the company’s home city of Austin, Texas, within six months, whilst releasing a prototype of its Optimus humanoid robot this year and starting production of a fleet of autonomous “cybercabs” in 2026.
“We made many critical investments in 2024 in manufacturing, AI and robotics that will bear immense fruit in the future . . . to such a scale that it is difficult to comprehend,” Musk said. “We’re building the manufacturing lines, setting up for what I think will be an epic 2026 and a ridiculous ‘27 and ‘28.”
Musk reiterated plans to release an upgraded SUV Model Y — the world’s best-selling car — alongside “more affordable models” in the first half of the year to galvanise flagging sales, without providing specifics.
“I see a path for Tesla being the most valuable company in the world, by far, not even close,” added Musk, the world’s richest man whose empire includes SpaceX, xAI, and social media platform X. “There is a path where Tesla is worth more than the next top five companies combined.”
Tesla shares gyrated on the results — initially falling 4 per cent in after-hours trading, then reversing to trade 4 per cent higher. The carmaker is the eighth-largest company in the world and has increased in value dramatically since Musk spent $250mn to help re-elect Donald Trump, gaining a powerful role to shape US policy and regulation as one of the president’s top advisers.
Analysts were less sanguine about the company’s performance.
“While Tesla discussed a return to vehicle growth it didn’t mention a specific target, versus Musk’s [prior] call for 20 to 30 per cent growth,” said Barclays analyst Dan Levy. “While the long-term narrative remains, the fourth-quarter was a ‘back to earth’ moment for Tesla stock, which has increasingly been disconnected from fundamentals.”
Musk dismissed the potential impact of Trump cancelling $7,500 federal EV tax credits, saying that soon “all transport will be autonomous and electric, including aircraft — it can’t be stopped any more than the advent of the internal combustion engine” replacing steam and horses.
Echoing its Big Tech peers, Tesla revealed a sharp increase in AI spending in the quarter. Capital expenditure rose 21 per cent to $2.8bn as it built a training cluster of 50,000 linked H100 Nvidia chips dubbed “Cortex” in its Gigafactory in Texas, which underpin its “full self-driving” autonomous technology.
Improving self-driving performance and winning federal and state-level regulatory approval is key for Tesla to launch its wheel-and-pedal-less Robotaxi, which it claims is “scheduled for volume production starting in 2026”.
Musk addressed fierce competition among tech companies, claiming that analysing billions of hours of video captured by its vehicles has given it the edge over rivals such as Google and OpenAI.
He said: “There is no company in the world as good at real world AI as Tesla. I don’t even know who second place is . . . I would need a very big telescope to see them, that’s how far behind they are.”
Shareholders had been braced for disappointment. Earlier this month, Tesla reported deliveries increased 2.3 per cent in the fourth quarter to 495,570 vehicles globally. While the company maintained its lead over China’s BYD, the figures fell short of estimates and on an annual basis declined in 2024 for the first time since 2011.
Fourth-quarter adjusted net income rose 3 per cent to $2.5bn, missing expectations for $2.6bn, according to a filing. Revenue rose 2 per cent to $25.7bn, missing the average $27.2bn analysts’ estimate.
Tesla’s operating margin fell to 6.2 per cent from 8.2 per cent, which the company blamed on lower average selling prices for its core Model S, X and Y cars because of heavy discounting and an “increase in operating expenses driven by AI and other R&D projects”.
Despite the hype around new robotic products, Tesla still makes about four-fifths of its revenue from selling cars.
It received a boost from sales of regulatory credits to rivals that build more polluting vehicles, with the amount received jumping 60 per cent year-on-year to $692mn.
Also offsetting Tesla’s disappointing EV sales was its fast-growing energy generation and battery storage division, which more than doubled revenue to $3.1bn in the quarter.
