Wolfe Research: Tesla’s Q3 2024 Deliveries Remain Stable, but Profitability Raises Concerns

**Wolfe Research: Tesla’s Q3 2024 Deliveries Remain Stable, but Profitability Raises Concerns**

Tesla, Inc. (NASDAQ: TSLA), the electric vehicle (EV) giant, has long been a focal point of both investor enthusiasm and scrutiny. As the company continues to lead the global transition to sustainable energy, its financial performance is closely monitored by analysts and investors alike. In a recent report, Wolfe Research provided an in-depth analysis of Tesla’s Q3 2024 performance, highlighting stable vehicle deliveries but raising concerns about the company’s profitability.

### **Stable Deliveries in a Competitive Market**

According to Wolfe Research, Tesla’s vehicle deliveries in the third quarter of 2024 remained relatively stable, in line with market expectations. The company delivered approximately 450,000 vehicles globally, a slight increase from the 445,000 units delivered in Q2 2024. This stability is notable given the increasingly competitive landscape in the EV market, with legacy automakers such as Ford, General Motors, and Volkswagen ramping up their electric vehicle production, alongside new entrants like Rivian and Lucid Motors.

Tesla’s Model 3 and Model Y continue to be the company’s best-selling vehicles, accounting for the majority of deliveries. The Model S and Model X, while still popular in the luxury segment, represent a smaller portion of overall sales. Tesla’s ability to maintain strong delivery numbers is a testament to its robust production capabilities, particularly at its Gigafactories in Shanghai, Berlin, and Austin.

However, Wolfe Research pointed out that while deliveries have remained stable, Tesla’s market share in key regions such as Europe and China has faced pressure from local competitors. In China, for instance, companies like BYD and NIO have gained traction, offering competitive EV models at lower price points. Similarly, in Europe, Volkswagen’s ID. series and other European automakers are making significant inroads into the EV market.

### **Profitability Concerns: Margins Under Pressure**

While Tesla’s delivery numbers are encouraging, Wolfe Research expressed concerns about the company’s profitability. Tesla’s gross margins have been under pressure in recent quarters, and Q3 2024 was no exception. The report highlighted several factors contributing to this trend:

1. **Price Cuts**: In an effort to maintain its competitive edge and stimulate demand, Tesla has implemented several price cuts across its vehicle lineup in 2024. While this strategy has helped sustain delivery volumes, it has also eroded the company’s profit margins. Wolfe Research noted that Tesla’s average selling price (ASP) has declined by approximately 7% year-over-year, which has had a direct impact on its gross margins.

2. **Rising Input Costs**: The global supply chain disruptions and inflationary pressures that have affected the automotive industry have not spared Tesla. The cost of raw materials, particularly lithium, nickel, and cobalt—key components in EV batteries—has risen significantly. Although Tesla has made strides in securing long-term supply agreements and investing in its own battery production, these cost increases have still weighed on profitability.

3. **Increased Competition**: As more automakers enter the EV space, Tesla has faced growing competition, particularly in the mid-range and luxury segments. To maintain its market share, Tesla has had to invest heavily in marketing, research and development (R&D), and production capacity expansion. These investments, while necessary for long-term growth, have contributed to higher operating expenses in the short term.

4. **Currency Fluctuations**: Tesla’s global operations expose it to currency fluctuations, particularly in markets like Europe and China. The strengthening of the U.S. dollar against other currencies has negatively impacted Tesla’s international revenue, further squeezing margins.

### **Operating Income and Net Profit Decline**

Wolfe Research’s report also highlighted a decline in Tesla’s operating income and net profit in Q3 2024. Operating income fell by 12% compared to the same period in 2023, while net profit dropped by 15%. This decline is largely attributed to the aforementioned margin pressures, as well as increased spending on new product development and factory expansions.

Tesla’s ongoing investments in its Cybertruck, Semi, and next-generation battery technologies are expected to drive future growth, but they have also contributed to higher capital expenditures in the near term. Additionally, the company is in the process of expanding its Gigafactory network, with new facilities planned in Mexico and India, which will further strain its cash flow in the short run.

### **Outlook for 2024 and Beyond**

Despite the profitability concerns, Wolfe Research remains cautiously optimistic about Tesla’s long-term prospects. The firm believes that Tesla’s leadership in battery technology, autonomous driving, and energy storage solutions will continue to provide a competitive advantage in the EV market. However, the report emphasized that Tesla must address its margin pressures to sustain its growth trajectory.

Wolfe Research also noted that Tesla’s ability to scale its production of the

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