All about Tesla: Is the Car Manufacturer in Trouble?

The Tesla stock has recently started dropping (28 September), and analysts are focusing on Tesla’s third-quarter deliveries, and lowering estimates. Deutsche Bank analyst Emmanuel Rosner cut his price target on Tesla stock from $300 to $285. While investors are unsettled about the drop in the company’s stock and are worried about a third-quarter delivery miss, the future looks even less rosy for Tesla as the outlook for 2024 may be deteriorating due to the limited volume growth next year.

2024 demand is Tesla’s big problem

Tesla delivery estimates tend to get trimmed when it is the end of most quarters, but the third-quarter cuts are bigger than those in the past. The recent cuts can be attributed to a planned plant downtime to change tooling for an updated Model 3. While a weak quarter is important, 2024 demand is a much more serious concern.

Deutsche Bank predictions

Deutsche Bank downgraded its price target for Tesla stock, warning that the electric vehicle maker’s earnings face strong headwinds in 2024.

According to Deutsche Bank’s Emmanuel Rosner Tesla signalled at an investor meeting at the recent Munich auto show that it doesn’t intend to increase its output to 10,000 per week at their two factories in Austin and Berlin. Instead, it will provide only incremental volume from both factories in 2024 and expects a small contribution from the Cybertruck with a slower upgrade of the vehicle. So, the bank anticipates Tesla to reduce its deliveries to around 2.1 million compared to market expectations of 2.3 million units.

Rosner has reduced amounts to around 9% for 2024 estimates, but the consensus 2024 estimate on Wall Street is only down (40,000 units) 2%, in the last few weeks of September 2023.

The news is not good for investors. From a decline in estimates, a fall in production growth, and minimal Cybertruck deliveries in 2024, things aren’t looking good for Tesla. The automotive giant intends to grow volumes at 50% a year on average for the coming few years. Next year’s growth is anticipated at 2.1 million units, less than 20% while deliveries are expected to rise to 1.8 million units for 2023, 40% up when compared to the previous year.

The positive, Rosner has noted, is that with less pressure to increase volumes, prices may be less high.

Tesla has already cut prices significantly at the start of this year to push demand, and investors will be looking for prices to stabilise and an increase in demand for Tesla electric vehicles.

While the Deutsche Bank analyst sees 2024 as a risky year for the stock, he considers Tesla shares as a Buy. Speaking to Barron’s he said that “longer term, the next-gen vehicle is a game changer for the industry.” He added though that it is important that the lower-cost, next-generation vehicle is available to buy in 2025.

Next-gen vehicle

While there is no official name yet for the next-gen vehicle, investors expect it to be a smaller Model 3 or Y and refer to it as the Model 2. The Model 2 is expected to act as a vehicle platform that can sell millions of cars a year.

Tesla stock: A buy?

Of the analysts covering the stock, 41% of them have rated the Tesla shares as a Buy. The average Buy-rating ratio for stocks in the S&P 500SPX +0.02% is 55%. A year ago, the average Buy-rating ratio was 64%. Following price cuts and higher interest rates, analysts are less enthusiastic, and the Tesla stock has lost some of its appeal. The average analyst price target is $258 on a Tesla stock, while in 2022 it was higher, around $318.

Tesla under scrutiny

Earlier in September, the European Union began a subsidy investigation on China, with non-Chinese brands of cars such as Tesla and BMW coming under scrutiny.

Valdis Dombrovskis, executive vice president of the European Commission, told CNBC that “There’s a  lot of speculation, but at this stage the scope of this investigation is not decided yet. So, we are doing the pre-initiation consultations with Chinese authorities and the scope is still to be determined, so what has been announced so far from the commission side is that, strictly speaking, it does not cover only Chinese brand electric vehicles.”

The EU started an inquiry into subsidies that China has given to EV makers after collecting evidence of important distortions in the European market. This is very important, as vehicles produced within the bloc are competing with cheaper vehicles made in China. Beijing authorities have attached Brussels to their “protectionist” views. Dombrovski clarified that the probe may cover other electric vehicles, but this hasn’t yet been decided. The EU investigation could last up to 13 months.

A new Tesla Model Y launched in China

A new Tesla Model Y with upgrades has made its debut in China. Tesla China announced the upgraded Model Y via its Weibo account. Tesla China’s Customer Support team explained that the Model Y update still uses Hardware 3.0. 

Tesla’s announcement was closely watched by many Tesla watchers who expected the new Model Y to feature Hardware 4.0. However, the updated Model Y’s autonomous driving hardware is not 4.0 but 3.0.

The recent improvements to the Tesla SUV would make it difficult to decide which one is better, the updated Model Y or Model 3 Highland.

The new Model Y is available with 19-inch black Gemini wheels instead of the previous silver ones and is said to improve the RWD’s range by 554 km. For an extra RMB 8,000 ($1,115), customers can get the 20-inch induction turbine wheels with the Model Y.

Gigafactory Shanghai’s new Model Y has some further alterations that have increased the range and improved wind resistance. The new Model Y LR variant’s range has increased by about 17 miles to 428 miles of range per charge. Its advanced wind resistance is a coefficient of 0.23.

The price of the Model Y RWD starts at RMB 263,900. Model Y Long Range and the Performance variant cost RMB 299,900 and RMB 349,900, respectively.

Tesla China offers a referral bonus that will end on October 31^st. This gives new Tesla buyers the privilege of saving up to RMB 3,500 on their final payment and receiving a 90-day trial period of Enhanced Autopilot.

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