Tesla's valuation has soared with the election of U.S. President Donald Trump, who is a close ally of CEO Elon Musk, but the electric car company posted a dip in deliveries last year, raising pressure for it to roll out a new, lower-priced model, as well as the autonomous vehicles and software that Musk says underpin its financial future.
Shares rose 3.2%, reversing initial losses in after-market trading.
"Affordability remains top of mind for customers, and we continue to review every aspect of our cost of goods sold," the company said in its earnings report. It added that those costs had hit their lowest level ever in the fourth quarter, at less than $35,000, driven by lower costs of raw materials.
Thomas Martin, senior portfolio manager at Tesla shareholder Globalt Investments, said Tesla's recommitment to delivering the new car in the first half of the year was unusual for the company and a positive. Tesla has a history of being late to deliver products.
"They've been able to execute on the cost side and get that down. And so their ability to do that in the fourth quarter, definitely cushioned the blow," he added.
Tesla has used cheap financing to pump up demand, a strategy analysts had predicted would erode automotive profit margins in future quarters as the company absorbs the impact of high interest rates.
Tesla's fourth-quarter profit margin from vehicle sales, excluding regulatory credits, fell to 13.59% from 17.05% in the prior three-month period, according to Reuters calculations. Wall Street had expected the figure to be 16.2%, according to 23 analysts polled by Visible Alpha.
Revenue was $25.71 billion for the October-December quarter, compared with estimates of $27.27 billion, according to estimates compiled by LSEG.
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 (002594.SZ), as well as European manufacturers BMW (BMWG.DE) and Volkswagen (VOWG_p.DE) have launched new cheaper models to capture market share.
The company has not revealed details regarding pricing, features and how its new models would be different from current offerings.
The company's gross profit margin stood at 16.3% in the October-December period, lower than estimates of 19.03%, according to 20 analysts polled by LSEG. Tesla posted a profit margin of 19.8% in the third quarter.
