It seems like Tesla has already hit the milestone as Elon-Musk led company now has the best-selling car model globally. However, some experts believe that this categorisation will hardly help the stock price to reach new highs. Tesla’s Model Y was categorised as Europe’s best-selling car in June. The reports came after the EV maker was able to surpass the sales of combustion engine cars like Dacia Sandero and Volkswagen T-Roc. Model Y was also the region’s top ranked seller overall in 1H. This is the first time that a Tesla’s model or the battery-electric car has been categorised as top-seller in 6 months.
As per the figures (preliminary) Dataforce, the SUV outsold the Dacia Sandero small hatchback, which was the No. 2 seller, by ~7,000 sales in both June and in 1H. To the surprise to many, it seems that the price is not at all a barrier to the Tesla’s success. The Dacia Sandero costs around €11,990, excluding the on-road costs in France. On the other hand, Tesla’s Model Y only starts from €45,990, excluding the on-road taxes and expenses. Over the period of 12 months of 2022, Tesla was able to sold ~138,128 Model Ys in Europe. As a result of this figure, the company was placed 13th overall. This exhibits a substantial improvement on its 130th position in 2021. In 2021, the company sold ~26,700 Model Ys.
According to the May 2023 data, the top-selling car in the world was Tesla’s Model Y, up 9 spots. Elon Musk-led EV automaker was able to sold 427,524 units (+85.3%). Second place was in the hands of Toyota Corolla. Its current YTD sales came in at 410,732, exhibiting a fall of 6.6% from the previous year. In 1H23, Tesla was able to sold ~860,000 Model Y and 3 units globally. In 1H23, Tesla was able to sell ~201,000 Model Ys, and ~113,000 units of Model 3 sedans.
As a result of this, the Model Y became the top-selling non-truck in United States. Top 3 spots were the Ford Motor (F-150), the Chevy Silverado, and Dodge Ram pick-up truck. These top-selling cars and trucks, which also includes Tesla’s Model Y, can be considered as bonafide hits. In the current economic environment, EV makers such as Ford Motors and GM, need to have a hit. This means they need cars which sells hundreds and thousands of units and not tens and thousands of units. However, some momentum was expected in Ford Motors because of its F-150 Lightning, but the defect related to battery and certain plant upgrades impacted the company’s growth plans.
Despite encouraging numbers, UBS downgraded Tesla
Against the expectations, UBS downgraded the company to “Neutral” from “Buy.” The company has given the price target of $270.00. This downgrade comes after the company’s 2Q beat.
Moving forward, UBS expects the stock to see limited upside in comparison to the expectations of the Wall Street analysts. This has been cited because it seem like strong execution of the company has been fully factored in.
Apart from this, 3 factors continue to contribute. First, Tesla’s 3Q might see a decline as a result of temporary production halts. Second, higher operating expenses are expected to act as drags due to projects such as Cybertruck and Dojo. Third, profit margins of the company will be dependent on advancements in the autonomy front, which appears to be overly optimistic to anticipate in the upcoming 12 months.
That being said, Tesla is still the undisputed truly global tech, scale and cost leader in electric vehicle space. The company has unparalleled software capabilities. According to UBS, the next 12 months will see limited upside. This is because significant volumes coming from new products (Cybertruck, and then the affordable model) will not kick in before 2H24.
Tesla has reported 2Q earnings, in which the company beat expectations. However, the stock price saw a decline because price cuts ended up impacting the margins. However, the company Chief Executive, Elon Musk informed that eventually, full autonomy should be able to help boost margins.
UBS said that autonomy is still a “multi-year process.” Big financial upside is only expected once full autonomy gets reached.
Tesla is up ~141% YTD
The company’s stock price made the investors richer by ~141% on the YTD basis. In 2Q, the company’s total revenue grew 47% year-over-year to $24.9 billion. This growth in revenue was supported by growth in vehicle deliveries and growth in several other parts of its business.
The company plans to increase production as quickly as possible. In some years, the company might see faster growth while, in some years, it might grow slower. Talking about liquidity, the company has ample liquidity to finance its product roadmap, long-term capacity expansion plans along with other expenses.
While the company continues to execute on innovations to decrease its cost of manufacturing and operations, it expects that its hardware-related profits will be accompanied by quicker adoption of AI, software and fleet-based profits. All these factors are expected to collectively improve the company’s profits.
The company’s product, Cybertruck, appears to be on track to start initial production in the later part of the year at its Gigafactory Texas. In addition, Tesla continues to make progress on its next-gen platform.
In 2Q, Tesla was able to produce record number of vehicles. This production was supported by ongoing ramps of the company’s new factories and healthy performance of Shanghai and Fremont.