Tesla’s strategy of aggressive price cuts backfired recently when, instead of spurring demand, it started incentivizing buyers to withhold their purchases in anticipation of deeper discounts. To counter this emerging phenomenon, Tesla has been steadily increasing the prices of its EVs by nominal amounts. Now, one analyst thinks that advertisements might be the way to go for Tesla to sustainably revive demand in the US.
As a refresher, Tesla cut the prices of its EVs by an average of between 12 and 15 percent during the first quarter of 2023. These price cuts, however, provided only diminishing returns, with Tesla’s sequential deliveries managing to grow by only 6 percent and sequential automotive revenue falling by around 7 percent.
As we expected, $TSLA has increased prices on M-Y by an additional $250 across all trims, and on M-S and M-X by $1K. This will likely change the pricing/margins narrative and increases confidence TSLA gross margins can bottom in 2Q. @elonmusk https://t.co/dUQcdaqhqd
— Gary Black (@garyblack00) May 12, 2023
Recently, Tesla has been steadily increasing the prices of its EVs in various markets. For instance, in early May, the company raised the price of the Model 3 and Model Y in the US by a nominal $250. Just a few hours back, Tesla again increased the price of the Model Y by $250 in the US. Concurrently, the Model S and Model X have received a price hike of $1,000 each in the US. This follows a price increase of between 2.4 percent and 2.2 percent for the Model S and Model X, respectively, in China last week.
Tesla’s situation has improved in China, which remains a critical market for the company’s success. The company delivered 39,956 EVs in China in April 2023, as per the estimates by CPCA. Moreover, Giga Shanghai exported 13,587 China-made Model 3s and 22,299 China-made Model Ys in April.
Another solid week for $TSLA China insured units 4/24-4/30 11.2K. First 5 weeks of 2Q looking strong vs past quarters.
Source: @piloly https://t.co/diPUMORsbM pic.twitter.com/vE4VsGsUre— Gary Black (@garyblack00) May 10, 2023
As per China’s weekly vehicle insurance data, Tesla has notably outperformed in the first five weeks of the second quarter of 2023.
"BYD cut the price of its Seal to $27,459 in China... the rear-wheel drive edition with a 550-km range...[is now] 18% cheaper than the rear-wheel drive Tesla Model 3 with a range of 556 km, against which the Seal competes" https://t.co/8IihGGV2EO
Hello negative $TSLA China GMs!
— Stanphyl Capital
(@StanphylCap) May 11, 2023
Nonetheless, competition is closing in. Consider the fact that BYD’s Seal EV now sells for just $27,459 in China, with the vehicle’s rear-wheel drive edition selling at an 18 percent discount to the comparable Model 3.
What’s more, BYD is all set to launch its own Full Self-Driving (FSD) offering in Q3 2023. The company’s bespoke Advanced Driver-Assistance System (ADAS), dubbed the DNP, is presumably comparable to Tesla’s Autopilot. However, it remains to be seen how the system performs in real-world conditions. Nonetheless, the fact remains that the competition for Tesla in China is heating up drastically.
To further aggravate the situation, Tesla has now been ordered by a Chinese regulator to update the software across 1.1 million EVs to improve braking performance and safety.
Adam Jonas: "Tesla is the only OEM to vertically integrate into upstream lithium refining. In our opinion, this only works because Tesla is the only player who can guarantee the volume offtake. But in order to guarantee the volume offtake, Tesla must be willing to potentially set… pic.twitter.com/Ft3Jvz2hFv
— Sawyer Merritt (@SawyerMerritt) May 11, 2023
Of course, Tesla has had some successes recently. Morgan Stanley’s Adam Jonas appears excited by Tesla’s move into the lithium refining arena. And the company has been making steady progress related to the production of the 4680 battery cells. Here, however, there is a catch. Just this week, Panasonic – Tesla’s partner in the production of 4680 cells – delayed its production of the new cells to further improve their performance.
$TSLA consensus 2024 est--which are absurdly optimistic--see EPS growing by 42% YoY.
And they have 91K Cybertrucks baked into that. But Panasonic can't supply them with the needed 4680 batteries till 2H of 2024.
If $TSLA can do 30K on their own, the PER is 43x vs current 34x. pic.twitter.com/LvnTU5MLWK
— Motorhead (@BradMunchen) May 11, 2023
It is hardly a surprise, therefore, that some consider Tesla’s 2024 consensus EPS estimates to be chronically bloated.
On first Tucker Carlson broadcast on Twitter which everyone will watch, how about $TSLA runs a 60-sec ad called “Why go EV?” that talks to EVs’ lower operating costs, shows how easy EVs are to charge, emphasizes near autonomy, lightning 0-60 performance, higher residual values,… https://t.co/0DOUlnJ5BO
— Gary Black (@garyblack00) May 10, 2023
So, what’s an easy fix here? Well, the Future Fund’s Gary Black thinks that Tesla should deploy 60-second ads on Tucker Carlson’s soon-to-launch show on Twitter. The endeavor would be nearly costless and has a decent chance of spurring additional demand for Tesla EVs in the US.
Elon Musk has taken pains to align himself with the political right in the US. Now he might as well leverage this key demographic to mint more money.
from Wccftech https://ift.tt/bHT5StX
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