Tesla's latest earnings report has sent shockwaves through the electric vehicle (EV) industry, with the company's profits plummeting 70% in the fourth quarter of 2024. Despite a 1.9% increase in revenue year-over-year, Tesla's net income took a significant hit, falling from $25.2 billion in Q4 2023 to $2.3 billion in Q4 2024.

The decline in profits can be attributed to several factors, including the company's ongoing efforts to reduce costs. Tesla has been working to bring down the cost of goods sold (COGS) per vehicle to under $35,000, which it attributes to "raw material cost improvement." Additionally, the company has been selling regulatory credits to other automakers, with $692 million in credits sold in Q4 2024, representing about a quarter of its profits. However, the future of these credits is uncertain, as President Trump has expressed his intention to kill California's emissions program that allows Tesla to rake in these credit sales.

Tesla's plans to release more affordable models remain on track, with the company reiterating its intention to bring a more affordable EV to market later this year. The refreshed Model Y, which starts at $61,630, is expected to begin deliveries in the first quarter of this year. The company also shared updates on its efforts to develop fully autonomous vehicles, with its drivers having cumulatively driven over 3 billion miles on Full Self-Driving (Supervised) as of January.

The earnings report comes on the heels of a disappointing production and delivery report, in which Tesla revealed that its sales had fallen year-over-year for the first time in over a decade. The company's lineup is increasingly looking stale, especially in China, where domestic automakers continue to churn out new, cheap, and technologically impressive EVs. Investors have been pressing Tesla for a more affordable model, and the company's response has been unclear, with Musk committing to a more affordable "Model 2" vehicle before abandoning the plan and then recommitting to it.

Meanwhile, Elon Musk's new role as chief cost-cutter for the Trump administration has raised questions about the company's future. Musk has been installing former employees in key positions and overseeing a potentially massive purge of federal workers. The impact of these changes on Tesla's operations and regulatory environment remains to be seen.

Tesla's manufacturing footprint is also expanding, with the company sharing new pictures of its Shanghai Megapack factory and the upcoming Semi truck factory in Nevada, where production is slated to start later in 2025. The company's 50,000 GPU training cluster in Giga Texas, called "Cortex," has enabled significant improvements in its Full Self-Driving (Supervised) technology.

The earnings report has sparked concerns about Tesla's ability to navigate the challenges facing the EV industry. As the company continues to grapple with cost-cutting efforts, regulatory uncertainty, and increasing competition, investors will be watching closely to see how Tesla responds to these challenges in the coming months.