Tesla Q1 deliveries are expected to exceed expectations
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Barclays Senior Autos Analyst Dan Levy spoke with Yahoo Finance, highlighting Tesla's cost advantage and the role of Elon Musk in the company's success.
According to Levy, Tesla's first-quarter delivery figures are expected to exceed expectations, with a forecast of 425,000 units, ahead of the consensus of 420,000 units. This positive outlook could catalyze the stock, which has recently faced negative sentiment due to questions about demand.
The Elon Factor: How Musk's Persona Affects Tesla's Branding
Levy addressed the potential impact of Elon Musk's public persona on Tesla's overall branding. While a recent poll indicated that 36% of Americans said Elon Musk makes them less likely to buy a Tesla, Levy stressed the importance of focusing on Tesla's product and cost lead rather than Musk's persona.
Levy acknowledged that Tesla wouldn't have achieved its current status without Musk's guidance and that his unorthodox approach has contributed to the company's success. He also highlighted the investor day event, where 17 people appeared on stage alongside Musk to showcase the depth of Tesla's bench and demonstrate that there is more to Tesla than its CEO.
Tesla's Cost Advantage, A Key to Unlocking Further Volume
Levy emphasized Tesla's significant cost advantage in the electric vehicle (EV) market, which he believes the company will use to unlock further volume by leaning into its margin advantage. He referred to Tesla's investor day, where the company expressed its intention to drive costs down and, in turn, unlock more volume.
This cost advantage is crucial for Tesla as it faces challenges common to other automakers in the EV market, such as ramping up volume and maintaining healthy margins. Levy noted that Tesla's cost advantage allows them to be more competitive and flexible in its pricing strategies, which will be essential for driving future growth.
Expectations of Further Price Cuts Amid Economic Pressures
As the global economy faces various pressures, Tesla is expected to make additional price cuts to remain competitive. Levy pointed out that the US auto industry's pricing is coming down from all-time highs, and Tesla is subject to the same dynamics. Furthermore, Tesla's new facilities in Austin and Berlin will increase supply, potentially leading to further price reductions.
However, Levy also mentioned that there might be some margin offset due to additional fixed cost absorption and moderating raw material costs. This, combined with Tesla's cost advantage, should help the company navigate the economic pressures and continue its growth trajectory.
A Clear Lead in EV Profitability
Tesla's first-mover advantage has given it a clear lead in EV profitability, with a 17% Earnings Before Interest and Taxes (EBIT) margin last year. Levy compared this to traditional automakers like Ford, which reported -40% EBIT margins on their EVs. This profitability gap demonstrates traditional automakers' challenges in transitioning to EVs and highlights Tesla's strong position in the market.
Tesla's strong Q1 delivery forecast, cost advantage, and a clear lead in EV profitability indicate a bright future for the company. Despite the potential impact of Elon Musk's persona, Tesla's focus on product quality and cost reduction should continue to drive growth and maintain its position as a leader in the EV market.
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Tesla has invested billions of dollars over the years toward vehicle autonomy. The mission continues as Elon Musk and Tesla now prepare to unveil their ride-hailing product, Robotaxi this August. Or, as Musk called it on Tuesday, Tesla CyberCab.
Early Days
Five years ago, during Tesla’s Autonomy Investor Day in April 2019, Elon Musk said he felt “very confident predicting autonomous robotaxis for Tesla in the following year [2020]”. At the time, Musk added a bolder claim, predicting that Tesla wouldn’t even make cars with steering wheels or pedals by 2022. While timeliness may not be Musk’s strong suit, he has a track record for getting things done that others were unwilling to try or thought were impossible. Musk later admitted he can be overly optimistic and said “sometimes I am not on time, but I get it done.”
Now, 5 years later, we have the robotaxi unveiling scheduled for August 8th. After the release of FSD v12, it’s clear that we’re much closer to autonomy than we were in 2019, although FSD v12 is still a far cry from full autonomy.
While Tesla still has the robotaxi unveiling scheduled for August, Tesla announced yesterday that it’d be prioritizing a simpler “next-gen” model that could be released by early 2025.
Latest Updates
On the conference call, Musk added that Tesla now has over 300 million miles driven with FSD v12 since it was launched just last month. He added that it's becoming “very clear that the vision-based approach with end-to-end neural networks is the right solution for scalable autonomy”.
Tesla said it has been investing in the hardware and software ecosystems necessary to achieve vehicle autonomy and a ride-hailing service. The company is confident that it can establish a scalable and profitable autonomous driving business by employing a vision-only architecture.
think of it [Tesla] as combination of Airbnb and Uber meaning that there will be some number of cars that Tesla owns itself and operates
Tesla = Uber + AirBnb
Later on, Elon Musk unveiled that the new service will operate and result in a mix between Uber and Airbnb where the Tesla driver decides if and when he wants his Tesla to be used and by whom. Tesla stated:
“We believe the Tesla software experience is best-in-class across all our products, and plan to seamlessly layer ride-hailing into the Tesla App.”
Tesla’s CEO clarified that the owners will be able to add or remove their car from the fleet “whenever they want” adding that it will be up to them to decide if they want to only let the car be used “by friends and family or only by five-star users or by anyone at any time”. The flexible program will, just like Airbnb, allow the owners to take the car out of the market when they want.
The upcoming ride-hailing service will enable users to easily request a Tesla vehicle, control the car's temperature, monitor its real-time location, and adjust the audio system. The only question is when.
“We have updated our future vehicle line-up to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025”. This was one of the key sentences that were part of Tesla’s deck shared on Tuesday directly before its financial results.
Since Reuters’ report a few weeks ago saying Tesla had “scrapped” the highly expected cheaper model— which Elon quickly denied on X —retail and institutional shareholders started asking for more details on Tesla’s product roadmap for 2024 and beyond.
In the earnings conference call, Elon Musk reiterated that Tesla expects to launch the next model in “early 2025, if not late this year”.
“We've updated our future vehicle lineup to accelerate the launch of new models ahead of previously mentioned start of production in the second half of 2025. So, we expect it to be more like the early 2025, if not late this year. “
Over concerns of temporary production halts to update the factories for these new models, Musk said that Tesla will produce new models with certain aspects from their next-generation platform and current models. This will reduce the number of changes needed on production lines and allow Tesla not only to ramp up production faster but also to get the vehicles to market quicker.
Model Y Redesign
Tesla appears to hit that their next-gen vehicle will be less “next-gen” than they were initially aiming for, but to get a new vehicle out the door by late 2024, the process would already have to be in motion. Tesla may likely be referring to the redesigned Model Y, which is expected to reuse many parts from the new Model 3. Earlier this year, Tesla said that the redesigned Model Y will not be released this year, so it makes sense that they’re looking to speed up that production.
Tesla CEO concluded by saying that these measures will allow Tesla to reach a capacity of over 3 million units. Tesla produced 1.84 million vehicles in 2023. However, this year they’re ramping up Cybertruck production and introduced the new Model 3 into new markets.
And we think this should allow us to get to over 3 million vehicles of capacity when realized to the full extent.
Tesla reported on Tuesday its earnings results followed by a conference call where it teased its upcoming Robotaxi and its next-generation platform saying its “purpose-built Robotaxi product will continue to pursue a revolutionary ‘unboxed’ manufacturing strategy”.
Earlier in the day, Tesla announced the new Performance variant of its sedan Model 3 with deliveries in the United States starting already next month. The new version starts at $45,490 (after applying the $7,500 Federal EV tax credit) and goes from 0 to 60mph in 2.9 seconds.
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