Tesla's Profits in Decline: AI Investments Rise as Electric Vehicle Sales Decrease

Sharp Decline in Profit and Revenue

Tesla's disclosed financial results reveal the company is going through a challenging period. Last year's net profit decreased by 46% compared to the previous year, falling to $3.8 billion. This means the company has experienced a sharp decline in profit for the second consecutive year. In the last quarter of the year, profit dropped from $2.1 billion in the same period the previous year to $840 million. The company's total revenue also decreased by approximately 3%, reaching $94.83 billion. This indicates Tesla's first-ever annual revenue decline.

Competition and Brand Perception Challenges

The electric vehicle business, which is the company's main revenue source, has been under increasing pressure for the past year. Competition has intensified, particularly as rivals like China-based BYD introduce newer models, often at lower prices. Additionally, the removal of tax incentives for electric vehicles in the US negatively impacted sales. To maintain sales, Tesla heavily resorted to discounts and incentives and launched cheaper versions of its best-selling models.

In an assessment to the Associated Press, telematics analyst Sam Abuelsamid stated, "They have products that are aging and becoming less competitive as rivals roll out new models. There's also general brand destruction. Musk's involvement in politics has alienated customers."

The Future Lies in Autonomy and Artificial Intelligence

Elon Musk, however, is urging investors to focus on the company's other business areas, such as its autonomous robotaxi plans, rather than vehicle sales. The company's energy storage business is also growing rapidly. Revenue in this area increased by 25% in the last quarter, reaching $3.8 billion. Tesla is benefiting from significant demand arising from data centers being built across the US that consume high amounts of energy.

Musk aims to transform Tesla from an electric vehicle manufacturer into an artificial intelligence company. In this context, Tesla announced that it will invest $2 billion in Musk's AI company xAI. This move is interpreted as an indicator of the company's future strategy.

Investors' Faith Continues

Investors appear to maintain their faith in Musk. Tesla shares have gained 9% in value over the past year. On Wednesday, when the profit results were announced, shares rose 2.5% in after-hours trading. One reason for the stock holding its value could be Musk's promise to continue focusing on the company following a foray into US politics. However, his plan to take his rocket company SpaceX public this year raises questions about whether it will divide his attention.

Such strategic transformations and workforce adjustments at tech giants have been common recently. For example, Amazon also laid off thousands of employees in its pursuit of efficiency. Similarly, the UK aims to compensate for potential job losses with AI efficiency. On the other hand, competition in the AI field is also making hardware supply critical. China's approval of imports of Nvidia's high-performance AI chips is also considered a reflection of this competition.