Latest Tesla Earnings and What it Means for the Stock

Tesla stock would normally look like a smart investment right now. With decent financials, a recent dip in price (almost 31% in 2025), and big promises about future technology, many investors would be eager to buy shares. However, Elon Musk's increasing support for right-wing politics and his anti-Europe comments have created unexpected challenges for the electric vehicle maker. While financial analysts like Morgan Stanley's Adam Jonas are labeling Tesla their "top pick," actual sales figures and consumer sentiment might tell a completely different story.

Tesla Q4 2024 Earnings Summary

Let’s start with the latest Tesla earnings report. It closed 2024 with mixed financial results, showing resilience and challenges ahead. The company reported $1.6 billion in GAAP operating income for Q4, contributing to a full-year total of $7.1 billion. Q4 net income reached $2.3 billion, including a $600 million gain from digital assets, while non-GAAP net income for the quarter stood at $2.6 billion. The company generated an impressive Q4 operating cash flow of $4.8 billion, with free cash flow reaching $2 billion, strengthening Tesla's cash position to $36.6 billion.

Despite these positive financials, operating income decreased 23% year-over-year, resulting in a 6.2% operating margin. This decline stemmed primarily from reduced vehicle selling prices and increased operating expenses for AI and R&D projects, though partially offset by lower per-vehicle costs and higher regulatory credit revenue.

Q4 marked record quarters for both vehicle deliveries and energy storage deployments. The company achieved a significant milestone by reducing the cost of goods sold per vehicle to under $35,000, its lowest level ever. It says this is thanks to improvements in raw material costs. This cost reduction helped Tesla offer more competitive financing and lease options to customers concerned about affordability.

Looking ahead to 2025, Tesla expects its vehicle business to return to growth. However, the pace will depend on autonomy development progress, factory production ramps, and the broader economic environment. The company projects energy storage deployments to grow at least 50% year over year and views 2025 as a "seminal year" for its Full Self-Driving technology. It plans to launch an unsupervised FSD option and begin Robotaxi service in parts of the U.S. later in the year.

Sales Reality Check

Despite the optimistic financial outlook, Tesla's actual sales numbers post Q4 and Donald Trump coming to office tell a concerning story:

• Tesla sales have plummeted in Europe, with a 76% decline in Germany (Europe's largest EV market).
• February 2025 deliveries in Germany were just 1,429 vehicles, down from over 6,000 in February 2024.
• Registrations fell by 45% across the EU (including France, Norway, Denmark, and Sweden) from January 2024 to January 2025.
• In Australia, sales dropped nearly 72% in February compared to the previous year.
• Even in California (the largest U.S. EV market), Tesla registered fewer cars in all four quarters of 2024, with sales falling 8% in the fourth quarter and 12% for the whole year.

The Musk Factor

The dramatic sales decline appears closely tied to Musk's political positions. The Wall Street Journal has reported on former Tesla owners who sold their vehicles specifically because of Musk's actions and the social implications of being seen as Musk supporters.

Musk has openly backed Germany's far-right AfD party and formed a close alliance with U.S. President Trump, who has historically supported oil and gas industries over electric vehicles. This political positioning creates a fundamental contradiction for Tesla: The consumers most likely to purchase electric vehicles tend to be environmentally conscious and often politically liberal, precisely the demographic that might now avoid Tesla products.

International Challenges

The company's international prospects aren't necessarily coming to the rescue either. There are talks about Tesla setting up manufacturing facilities in India. Indian Prime Minister Narendra Modi met Musk during his U.S. visit to convince him to set up shop in India. However, the Indian market is a tough nut to crack. In India, business leader and billionaire industrialist Sajjan Jindal recently expressed skepticism about Tesla's potential impact in the country, suggesting that local manufacturers like Tata and Mahindra have a competitive advantage that Musk, despite being a genius, can't overcome.

Meanwhile, the Chinese giant BYD is steering clear of all political controversy and has been surging ahead with its sales in Europe and the U.S.

The Financial Case

Tesla's stock gained an impressive 63% in 2024, most of that growth happening in the fourth quarter after Donald Trump's election victory. Morgan Stanley recently reinstated Tesla as their "top pick" in U.S. auto stocks, suggesting that the current dip in vehicle deliveries could create an "attractive entry point" for investors interested in artificial intelligence.

The company continues to pursue ambitious technology plans. During the latest earnings call, Musk announced that unsupervised full self-driving (FSD) will be available as a paid service in Austin, Texas, starting in June. Robotaxi tests are planned across multiple U.S. cities by the end of the year.

Looking further ahead, Musk claims 2025 will be a year for laying "groundwork," setting up for what he describes as an "epic" 2026 and "ridiculously good" 2027 and 2028. These projections are based on advancements in artificial intelligence, autonomous vehicles, and the Optimus humanoid robot, which Musk believes will eventually become "overwhelmingly the value of the company."

Investment Verdict

For investors considering Tesla stock, the decision comes down to weighing technological potential against real-world sales trends. While the company's AI, self-driving technology, and robotics innovations could eventually deliver extraordinary returns, the immediate sales slump across major markets presents a significant concern.

Potential investors should consider whether Musk's political alignment will continue to drive away Tesla's traditional customer base and if the promised technological breakthroughs can arrive quickly enough to overcome these challenges. The stock might be a good long-term investment if you believe in Tesla's technological vision but be prepared for a bumpy and potentially lengthy road ahead. The target price for Tesla ranges from $264 levels (barely 0.7% up from March 7) close to Morgan Stanley’s $800 bull case when and if Musk gets his ducks in a row.

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