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[Financial Results Preview] Tesla Signs of Strategic Change What is the driving force behind future growth?

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moomooニュース米国株 wrote a column · Apr 19 03:52
Major US EVs $Tesla(TSLA.US)$Is4/24 5:00 Japan timeupon2024 Q1 financial results are scheduled to be announced。
According to market consensus, Tesla's first quarter sales compared to the same period last year$22.521 billion, down 3.46%, EPS compared to the same period last year$0.44, down 39.48%It is expected.
Source: moomoo
Source: moomoo
Tesla in 2024 had a rough start. A decrease in the number of car deliveries was expected to drag profits, and intentions such as personnel cuts due to sluggish demand and intensifying competition were also conveyed. Due to a series of bad news in recent months, Tesla's stock price has fallen by nearly 40% year to date, making it the worst performing major stock this year.
Due to the decline in demand for electric vehicles in general and the intensification of competition from China, the company's quarterly profit declined 40% from the same period last year in the 23/Q4 financial results reported in January, and sales growth also stopped at 3%, which is lower than expected. Also, the number of car deliveries in the first quarter, which was revealed at the beginning of the month, declined sharply compared to the same period last year, which is a nightmare figure for the company. The EV giants are facing a difficult year.
Source: moomoo
Source: moomoo
Slowing EV demand and shrinking profit margins
The number of car deliveries for the first quarter announced by Tesla on the 2nd of this monthIt was 38,6810 units, down about 8.5% from the same period last year, far below the forecast of 449,000 units。As a quarter, it was the lowest level since 344,000 units in the second quarter of 2022. The company says that this is because consumer purchasing motivation was sluggish due to high interest rates with regard to the number of cars delivered in the first quarter, and in addition to the suspension of factory operations, there were problems with starting production of the improved model 3.
Source: Investopedia
Source: Investopedia
An analyst at Wedbush Securities, who has been a Tesla bully for many years, said that clearly showing Tesla's growth strategy in the Chinese market and the global market will be the key to reversing concerns about demand at the financial results briefing next week.
The automobile market is highly cyclical, and there is a possibility that demand will drop sharply depending on the economic situation. Tesla, a major EV company, is exposed to intensifying competition with conventional automobile manufacturers and new entrants. If new low-priced EVs enter the market, the company will be forced to continue price cuts, and there is a possibility that industry-leading profits will decline.
Also, the company increased research and development expenses last year even as growth slowed, further squeezing profit margins falling due to price cuts.Profit margins in Q23 contracted to 17.6%, down from 23.8% in the same period last year. Attention is being paid to whether the profit margin for Q1 '24 will approach about 18% of the previous fiscal year, or whether it will drop drastically.
Fully automated driving (FSD) technology
On the 26th of last month, Tesla is proceeding with the introduction of providing a driver support function called “fully autonomous driving (FSD) capability” free of charge for 1 month to existing customers and new customers in the United States. Furthermore, on the 12th of this month, the price of fully automated driving (FSD) was lowered from 199 dollars per month to 99 dollars per month. It aims to expand the use of “fully autonomous driving” software.
As level 3 “fully autonomous driving” software technology, which is an important part of Tesla's strategy, is improved, I expect the management team to announce when this technology will be introduced and monthly subscription revenue can be earned.
Low-cost models and autonomous taxis
On 4/5, Reuters reported that Tesla plans to stop developing affordable, low-cost EVs and concentrate on developing autonomous driving software to launch robo-taxis. However, Tesla officials, including Chief Executive Officer Elon Musk (CEO), denied this report.
Immediately after that, Elon Musk posted on X (old Twitter) that a “robo-taxi” that does not require a driver will be announced on 8/8. As Tesla faces profit pressure due to sluggish sales volume growth and price cuts, Mr. Musk has emphasized the importance of initiatives for autonomous driving functions. Prior to this, he said that they aim to start robo-taxi production by the end of the year. It appears that the development of robo-taxis will be prioritized over the low cost model that has supported growth expectations for Tesla.
Morgan Stanley analysts stated that the cancellation or postponement of Model 2 sales may be “a recognition that even if EVs are manufactured and sold with conventional consumer models, they may not be able to generate sustainable economic value.”
It is estimated that it will probably take several years for robo-taxis to be fully realized, but the market expects the release of the Model 2, which is expected to be in the 25,000 dollar range, within the next 18 months. However, the fact that CEO Elon Musk seems to focus on robo-taxis rather than the cheaper Model 2 may further test investors' patience.
For Wall Street analysts, the fact that robot taxis and FSD will drive Tesla's future growth involves considerable risk. Mr. Rosner, an analyst at Deutsche Bank who downgraded Tesla the day before, said “the strategy has changed” within Tesla, and in addition to focusing only on robotaxis and emphasizing the risk of moving away from the core electric vehicle production, he warned that if the entire company were to bet on robotaxis, there is a possibility that it will face long-term issues.
This article uses automatic translation for some parts
Sources: Morningstar, Forbes, Yahoo Finance, Investopedia, Dow Jones
— moomoo news vicky
[Financial Results Preview] Tesla Signs of Strategic Change What is the driving force behind future growth?
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