** I have no position that is impacted by this post**
Over the past few years, TSLA has performed nothing short of extraordinary. In the last five years, Tesla stock has almost 10x its value. The 857% total return of Tesla is substantially higher than all of its peers, including Ford, Toyota, and Volkswagen
Despite strong growth, weakness has begun to present itself within the Wall Street prince in the past year. Tesla announced earlier in February 2023 that it would be cutting prices on the Model Y. This move surprised investors because, before the price cuts, Tesla appeared to be entirely supply-side constrained. However, investors noted that these cuts only impacted higher-end models that were outside the range of the mass vehicle market. However, in April, Tesla announced that it would be cutting prices on the Model 3. Elon Musk has previously alluded to a poor performing EV market in the wake of a higher interest rate environment. Economic data confirms this narrative as Automobile shipments have declined substantially in Q3’ 2023.
However, two factors that cannot be explained by an adverse economic environment are Full Self-Driving (FSD) and Cybertruck demand. FSD is Tesla’s end-to-end autonomous driving solution.
Tesla’s FSD is considered a level 2 autonomous driving solution. Level 2 systems require the driver to remain alert at all times with the anticipation that driver will have to take over in every circumstance. Tesla CEO Elon Musk has repeatedly claimed that FSD would be finished by the end of the year for the past six years. Additionally, Musk has claimed that robo-taxis, completely automated taxi services would be available during the same timeframes. Tesla’s current FSD beta boasts some impressive technologies, including the ability to navigate through city streets without immediate intervention in many cases. However, level 3 seems to be uncertain for the car company. On the other hand, Tesla’s competitors such as Waymo, Mobileye, and Cruise have all operated in some capacity at level 3 or level 4. In particular, Mobileye has proved to be a serious threat to FSD due to its goal of integrating in Tesla’s competitors. Mobileye has outlined several technologies that are set to compete with Tesla’s current offerings as well as Tesla’s future capabilities.
The Cybertruck further highlights Tesla’s habit of misleading shareholders. The Cybertruck is Tesla’s consumer pickup truck expected to be launched in Q4 2023. In Tesla’s Q2 2023 earnings call, Musk stated that Cybertruck demand is, “so off the hook, you can’t even see the hook.” EV insider reported that this statement was likely to transfer into 1.9 million preorders. However, Tesla failed to mention that the Cybertruck’s preorder deposit was $100. In Tesla’s Q3 earnings call, Musk stated that “We dug our own grave” when referring to Cybertruck. He noted that he expects it to be 18 months before Cybertruck is cash flow positive, adding another timeline onto a timeline full of delays. Musk still sees demand surpassing one million units. However, it seems unlikely that demand will be that high, considering high interest rate environment and mere $100 commitment by prospective buyers.
Leave a Reply