Tesla’s secret weapon: US automakers’ flaws

Defense. Tesla was supposed to dominate the world. Back in 2022, high off the pandemic wave of rising prices, growing profit and burgeoning electric-vehicle enthusiasm, boss Elon Musk foresaw years of steady 50% growth in sales. Results for the fourth quarter show that idyll fading as prices fall and Chinese rivals rise. At least Musk has one boon: his hometown foes are still behind.

There are sparse positives in the results released Wednesday night. Tesla’s automotive gross margin, adjusted for the sale of regulatory credits, stopped its year-long slide, ticking back up to over 17% as costs per car fell for the sixth quarter in a row. And the company did hit its lowered 37% delivery growth target. But it warns of further sinking ambition, saying that number may be “notably lower” in 2024.

It’s hard for growth to fall further from here: automotive revenue less credits was up around 1% year-over-year. And the market is only getting tougher. China’s BYD  became the biggest seller of electric vehicles globally at the end of 2023. At home, total U.S. electric vehicle sales barely budged up in the fourth quarter from the prior three months, Cox Automotive reckons.

The bad news keeps going. Tesla’s brightest spots, its energy generation and services business, saw revenue come in below analyst estimates, according to LSEG, as gross profit margins in both divisions slipped. To top it all off, Musk has strayed afield of investors’ cry for a new, cut-price vehicle to ward off BYD and its ilk, instead focusing on the troubled launch of the bizarre, expensive Cybertruck.

There is a silver lining, though. Despite touting huge efforts in electrification, old-guard rivals in the U.S. market, including General Motors and Ford Motor are still struggling to get off the starting line. That’s despite tariffs insulating the market from Chinese competition.

Tesla is the only carmaker cracking six-digit electric-car sales in the U.S. annually, according to Cox. Though slowing, its 2023 growth rate still outpaced Ford, which last week said it would cut production of its battery-powered pickup. GM has abandoned EV targets. Toyota Motor’s big electric push won’t see next-generation models released until 2026.

Musk faces a rising set of risks. But others’ stumbles may at least give him some breathing room in a core market to address them.