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Elon Musk to analysts: Don't doubt me – Automotive News

by Nov 5, 2022Blog0 comments

Tesla Inc. posted record sales numbers in the third quarter, but analysts are expressing doubts about the EV leader’s ability to power through an economic slowdown — despite CEO Elon Musk’s assurance that the company is “certainly recession-resilient.”
As of market close Thursday, Oct. 20, the high-flying stock is down 48 percent so far this year, including a nearly 7 percent decline following Tesla’s third-quarter earnings report last week. By comparison, the Nasdaq Composite Index is down 33 percent this year.
Tesla’s third-quarter revenue and vehicle deliveries missed analysts’ estimates. At least six brokerages lowered their price targets on the stock, according to Reuters, with Tesla bull Wedbush Securities making the biggest cut of $60, bringing its target to $300 a share.
Part of the doubt concerns Musk’s sales target of growing by about 50 percent a year into the foreseeable future — along with his predictions that Tesla could become the most valuable company in the world, beating leaders Apple Inc. and Saudi Aramco in combined value.
In 2021, Tesla sold fewer than 1 million vehicles globally on the strength of two volume models.
“Even for Tesla, which has experienced tremendous sales success over the past few years, a 50 percent growth target is ambitious,” said Jessica Caldwell, executive director of insights at Edmunds.
“While we expect heightened interest in EVs to generate a much larger buyer base for EVs more broadly, the current economic headwinds throw a wrench into this growth plan,” she said.
Caldwell also noted that Tesla’s four-vehicle lineup is in need of a refresh.
Even as Tesla continues to quickly ramp up new factories in Texas and Germany and prepares to launch the Cybertruck pickup in the U.S. next year, Musk acknowledged economic weakness in China and Europe and rising interest rates in the U.S. as the Federal Reserve tackles inflation.
Nonetheless, he told analysts last week that the company is positioned for sales growth of around 50 percent annually because it leads the global EV market and “the people of Earth have made the decision to move away from gasoline cars to electric cars.”
“I wouldn’t say that [Tesla] is recession-proof,” he said, “but certainly recession-resilient.”
Indeed, the tech billionaire said the automaker is planning to use some of its growing cash position on a stock buyback plan next year.
Tesla didn’t provide much information on its future product road map. But Musk did tease a new vehicle platform that he said will be smaller and cost significantly less than the one underpinning the compact Model 3 sedan and Model Y crossover.
It’s not the first time Musk has talked about a new platform.
In April, he said Tesla will make a dedicated robotaxi model — without a steering wheel or pedals — by 2024. Some analysts believe the new platform is for the robotaxi.
“We don’t know the exact dates, but this is the primary focus of our new vehicle development team,” Musk said. The new vehicle eventually will exceed the volume of all other Tesla vehicles combined, he added.
Musk also previewed the launch of the company’s long-haul cargo vehicle, the Semi, with an undisclosed number of first deliveries slated to go to PepsiCo Inc. in December.
Tesla originally previewed the Class 8 truck in 2017 with plans to launch it in 2019.
Musk said the Semi will live up to its promise of a 500-mile range, fully loaded with cargo on level pavement. By 2024, he said, Tesla could be selling 50,000 Semis in North America before expanding to global markets.
Tesla also acknowledged on the earnings call that the Semi will not initially use the company’s next-generation 4680 battery. When the large-format cylindrical cell was announced in 2020, Tesla said it would power its most energy-hungry products, like trucks.
Tesla is now ramping up production of 4680 cells, but there are technical challenges, Musk said. The company is developing new battery-making technologies for the 4680 to vastly reduce manufacturing costs.
“It’s a hard problem that we’re solving, and I think we still feel confident that the 4680 will be the most competitive battery cell in the world,” Musk said. Tesla is now making some of its Model Y crossovers in Texas using the new cell format, he added.
Another key product Musk has touted as a game-changer for the company is its Full Self-Driving software, which is now in beta form and cannot drive without human supervision.
Tesla sells the software to its customers for $15,000 as an advanced driving-assistance feature. That is generally considered a Level 2 system, not Level 4 or Level 5 autonomy.
On the call, Musk said the software will not be fully autonomous this year, in response to an analyst’s question. It will still require driver corrections.
The analyst, Collin Langen of Wells Fargo, later told Yahoo Finance that Musk’s definition of “full self-driving” seems different from the industry overall. Langen noted that he rode in a vehicle using the autonomous operator Cruise, without a human driver.
“What [Musk] described on the call really isn’t what most experts would call Level 4, Level 5 full self-driving,” Langen told Yahoo. “Someone still has to monitor the vehicle. That would be an advanced Level 2-plus type of system.”
In its third-quarter financial statement, Tesla said it reached net income of $3.29 billion, nearly double the level of a year earlier. But it had lower than expected revenue as the global EV leader delivered fewer vehicles than expected.
The company’s revenue for the third quarter tallied $21.45 billion, compared with analyst estimates of $21.96 billion, according to data from Refinitiv, Reuters said.
Tesla delivered a record 343,830 vehicles last quarter, for a 42 percent increase over last year. The Automotive News Research & Data Center estimates that in the U.S., it sold a record 114,000 vehicles, for a 47 percent jump.
Morningstar said it maintains a positive long-term outlook for the automaker, despite slightly missing some of Wall Street’s expectations in the third quarter.
“We expect Tesla will eventually grow vehicle deliveries to over 5 million [annually] by 2031,” Morningstar said. “We forecast the company will be able to reduce unit production costs while also growing ancillary services including autonomous driving software.”
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