Tesla fell short of analysts' estimates for gross profit margin in the fourth quarter on Wednesday, as the electric vehicle (EV) maker rolled out financing offers and discounts to spur flagging demand for its ageing line-up.

Shares of the Austin, Texas-based automaker fell 4 per cent in trading after the bell.

Tesla has employed more affordable financing options to pump up demand, a strategy analysts predict will gradually erode automotive profit margins in future quarters as the company absorbs the impact of high interest rates.

The EV pioneer’s annual deliveries dropped for the first time last year, due to higher borrowing costs and intense competition.

Rivals such as China’s BYD, as well as European manufacturers BMW and Volkswagen have launched new cheaper models to capture market share.

Tesla has said it expects volume growth of 20 per cent to 30 per cent in 2025 and investors believe a cheaper model based on current platforms set to be launched in the first half of the year and higher deliveries of the Cybertruck will help achieve the target.

The company, however, has not revealed details regarding pricing, features and how it would be different from current offerings.

The company’s gross profit margin stood at 16.3 per cent in the October-December period, lower than estimates of 19.03 per cent, according to 20 analysts polled by LSEG. Tesla posted a profit margin of 19.8 per cent in the third quarter. – Reuters

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