Elon Musk’s Tesla on Wednesday reported a fall in fourth-quarter gross margin from a year earlier as it cut prices and offered incentives to boost demand for its electric vehicles.

Tesla warned of a sharp slowdown in volume growth this year compared with the previous year.

“In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next-generation vehicle at Gigafactory Texas,” it said in a statement.

Shares of the Austin, Texas-based company fell 5% in extended trading.

The company reported a gross margin of 17.6% for the three months ended December, compared with 23.8% a year earlier, and analysts’ average estimate of 18.3% according to LSEG data.

In the third quarter, Tesla posted gross margin of 17.9%.

Record deliveries in the quarter also pushed margins lower, as price cuts and costs associated with the production ramp-up of the new Cybertruck offset lower costs of raw materials for batteries.

Tesla slashed prices throughout last year. It reduced the price of the Model Y, its most popular vehicle, by as much as 26.5% in the past year in the US.

The company managed to hit its 2023 deliveries target of 1.8 million cars, even as CEO Elon Musk warned of a hit to demand from high interest rates.

However, Tesla lost its spot as the top EV maker by sales to China’s BYD in the fourth quarter.

Tesla’s fourth-quarter revenue rose 3% to $25.17 billion, which marked its slowest pace of growth in more than three years.

Analysts on average expected $25.62 billion, according to LSEG data.