{"id":59146,"date":"2023-12-22T06:00:58","date_gmt":"2023-12-22T11:00:58","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=59146"},"modified":"2023-12-22T14:34:29","modified_gmt":"2023-12-22T19:34:29","slug":"how-advances-in-ev-tech-could-shape-tslas-stock-future-beyond-2024","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2023\/12\/how-advances-in-ev-tech-could-shape-tslas-stock-future-beyond-2024\/","title":{"rendered":"How Advances in EV Tech Could Shape TSLA's Stock Future Beyond 2024"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The automotive industry is undergoing one of the most significant technological shifts. The market for electric vehicles (EVs) is experiencing exponential growth, one that shows no signs of abating over the forthcoming decade.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Strikingly,<\/span><a href=\"https:\/\/www.reuters.com\/business\/autos-transportation\/us-electric-vehicle-sales-hit-record-high-tesla-loses-market-share-report-2023-10-12\/\"> <span style=\"font-weight: 400;\">EV sales in the U.S.<\/span><\/a><span style=\"font-weight: 400;\"> leaped over the 300,000 mark for the first time in the third quarter of 2023. Proving significance, an unprecedented sale of<\/span><a href=\"https:\/\/www.atlasevhub.com\/weekly-digest\/one-million-evs-sold-through-september-2023\/\"> <span style=\"font-weight: 400;\">nearly 136,000 light-duty EVs<\/span><\/a><span style=\"font-weight: 400;\"> was recorded in September 2023, demonstrating a bustling year-over-year increase of 67%.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Accounting for around 10% of total auto sales for several preceding months, the EV market share leaped to 11% in September for new sales. Emphatically, the year saw the achievement of a notable milestone \u2013 the sale of over<\/span><a href=\"https:\/\/electrek.co\/2023\/12\/05\/us-ev-sales-pass-1-million-2023\/\"> <span style=\"font-weight: 400;\">one million EVs in 2023<\/span><\/a><span style=\"font-weight: 400;\">. About<\/span><a href=\"https:\/\/finance.yahoo.com\/news\/ev-sales-thriving-us-stay-173251645.html\"> <span style=\"font-weight: 400;\">67% of U.S. citizens<\/span><\/a><span style=\"font-weight: 400;\"> are open to buying an EV, according to S&amp;P Global Mobility.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The prediction for EV adoption over the next decade is a broad spectrum, influenced by rapid developments in<\/span><a href=\"https:\/\/www.nerdwallet.com\/article\/taxes\/ev-tax-credit-electric-vehicle-tax-credit\"> <span style=\"font-weight: 400;\">government policies<\/span><\/a><span style=\"font-weight: 400;\"> and shifts within the auto manufacturing industry. According to an RMI report,<\/span><a href=\"https:\/\/www.automotivedive.com\/news\/evs-reach-86-percent-global-vehicle-sales-2030\/695319\/\"> <span style=\"font-weight: 400;\">EVs could account for 62% to 86%<\/span><\/a><span style=\"font-weight: 400;\"> of global sales by 2030.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Texas-based automaker<\/span><a href=\"https:\/\/quotes.ino.com\/search\/?s=NASDAQ_TSLA\"> <span style=\"font-weight: 400;\">Tesla, Inc. (TSLA)<\/span><\/a><span style=\"font-weight: 400;\"> has made waves with record sales of over 2 million Model Ys in under four years. TSLA delivered over<\/span><a href=\"https:\/\/finance.yahoo.com\/news\/tesla-whiffs-on-q3-deliveries-says-factory-downtimes-to-blame-150853624.html\"> <span style=\"font-weight: 400;\">419,000 Model 3 and Model Y in the third quarter<\/span><\/a><span style=\"font-weight: 400;\">. Model Y is expected to eclipse the aggregate sales of the Model 3 this quarter, cementing its position as the best-selling EV in history.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Model Y stands unrivaled as the top-selling auto of the manufacturer. Its accelerated production rate, though impressive, does not come as a surprise, given that the model is being manufactured in four of TSLA's factories around the globe: Fremont, Giga Shanghai, Giga Berlin, and Giga Texas. The concentrated efforts directed toward the production of Model Y have indeed yielded positive results. Consequently, the company commemorates yet another significant achievement.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">2023 saw a downturn for EV stocks, as uncertainties surrounding demand and pricing, coupled with escalating interest rates, challenged the once bullish sentiment for the 'Green Tidal Wave' investment theory. Despite this downturn, EV powerhouse TSLA managed to overcome the selling pressures, registering an impressive 106% gain year-to-date.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, looking forward to 2024, some analysts express concerns about the prospects of TSLA stocks, speculating that underwhelming growth in deliveries and diminishing margins could darken the outlook.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Inflation-sapped consumers are hesitant to invest substantial sums in expensive EVs. The average cost of a<\/span><a href=\"https:\/\/www.cars.com\/articles\/how-do-inventory-and-pricing-look-for-the-ev-market-475867\/\"> <span style=\"font-weight: 400;\">new EV is $63,725<\/span><\/a><span style=\"font-weight: 400;\">, while fossil-fuel-powered new cars cost $48,431 on average.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This reluctance is reinforced by recent media reports suggesting automakers themselves are expressing concern about the growth of the EV sector. Waning consumer demand and the ineffectiveness of President Biden's tax incentives in shifting consumer preferences toward EVs have intensified these anxieties.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The principal predicament faced by TSLA lies in the consumer demand area, attributable to its high cost and limited product range, mainly comprising of the Model 3 and Model Y. Encountering market saturation and intensified competition within the EV sector, TSLA confronted the pressing need for price cuts that inevitably impact profitability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">To ignite demand, the firm had no option but to instigate dramatic price slashes in 2023. Striving to achieve a year-over-year volume boost of approximately<\/span><a href=\"https:\/\/markets.businessinsider.com\/news\/stocks\/tesla-q3-earnings-preview-wall-street-expectations-cybertruck-elon-musk-2023-10\"> <span style=\"font-weight: 400;\">485,000 units<\/span><\/a><span style=\"font-weight: 400;\"> in the current financial year, TSLA instituted a<\/span><a href=\"https:\/\/www.businessinsider.in\/thelife\/news\/tesla-keeps-chopping-prices-making-its-cars-cheaper-than-even-gas-competitors\/articleshow\/104378603.cms\"> <span style=\"font-weight: 400;\">roughly 25% price reduction<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This maneuver resulted in a consequential strain on automotive gross margins. TSLA is anticipated to grow volumes<\/span><a href=\"https:\/\/www.streetinsider.com\/Analyst+Comments\/Bernsteins+best+idea+for+2024%3F+Short+Tesla+stock\/22505844.html?classic=1\"> <span style=\"font-weight: 400;\">by over 400,000 units<\/span><\/a><span style=\"font-weight: 400;\">, maintain flat prices, and enhance automotive gross margins by over 200 basis points.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Despite price reductions, TSLA is not witnessing a corresponding surge in sales. In fact, there was a measurable decline in car deliveries to customers in the third quarter of 2023. Metrics reveal a drop in revenue quarter-over-quarter and a constriction of the company's previously robust gross margins, falling to 17.9% in the third quarter from 25.1% a year ago.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The altered landscape is not seeing competitors phased out either. TSLA, which once held an unrivaled position in the EV market, has seen its U.S. market share plummeting: starting the year commanding a formidable 62%,<\/span><a href=\"https:\/\/www.investopedia.com\/teslas-share-of-us-electric-vehicle-market-slipped-to-a-new-low-in-q3-8356288\"> <span style=\"font-weight: 400;\">it now holds a mere 50%<\/span><\/a><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">TSLA may face headwinds as<\/span><a href=\"https:\/\/www.bnnbloomberg.ca\/ev-inventories-hit-record-high-in-us-as-cars-pile-up-on-dealer-lots-1.2011841\"> <span style=\"font-weight: 400;\">growing dealer inventories<\/span><\/a><span style=\"font-weight: 400;\"> could present challenges for the EV sector. EVs are languishing on dealership lots for an average of 114 days; this is a record-breaking figure that is more than double the year-ago 53-day figure and significantly exceeds the auto industry standard of 71 days.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Further impacting the scenario is the<\/span><a href=\"https:\/\/www.cnbc.com\/video\/2023\/12\/08\/why-used-ev-prices-are-falling.html\"> <span style=\"font-weight: 400;\">falling used EV prices<\/span><\/a><span style=\"font-weight: 400;\">. This might stimulate the second-hand car market, but it could act as a deterrent for new car sales. Potential buyers could be hesitant to invest in new vehicles that depreciate rapidly once driven off the lot.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">TSLA confronts a unique set of circumstances that could deter prospective buyers. In January 2024, TSLA\u2019s Model 3 RWD and Long-Range models will<\/span><a href=\"https:\/\/arstechnica.com\/cars\/2023\/12\/tesla-model-3-may-lose-7500-tax-credit-in-2024-under-new-battery-rules\/\"> <span style=\"font-weight: 400;\">no longer qualify<\/span><\/a><span style=\"font-weight: 400;\"> for the $7,500 federal tax credit for EVs. The company's<\/span><a href=\"https:\/\/electrek.co\/2023\/12\/13\/tesla-signals-model-y-losing-full-7500-tax-credit\/\"> <span style=\"font-weight: 400;\">Model Y may be impacted<\/span><\/a><span style=\"font-weight: 400;\"> by this rule change as well. This regulation comes because of recent trade restrictions with China, which curtail the number of parts manufacturers can import from the country.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The revocation of these tax credits suggests incoming price reductions for TSLA EVs to boost demand. Price reduction next year could further erode profitability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Despite these challenges, TSLA intends to produce less costly vehicles in the future. CEO Elon Musk has<\/span><a href=\"https:\/\/www.forbes.com\/sites\/brookecrothers\/2023\/12\/05\/elon-musk-gives-update-on-25k-tesla-model-2---will-blow-peoples-minds\/?sh=327e8cad6513\"> <span style=\"font-weight: 400;\">revealed plans for the Model 2<\/span><\/a><span style=\"font-weight: 400;\">, which is expected to retail at $25,000. This, however, may not materialize in the short run as it could jeopardize Model 3 and Model Y sales.<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">Unfavorable Analyst Estimates<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">Analysts expect TSLA\u2019s revenue for the fourth quarter (ending December 2023) to come in at $25.53 billion, suggesting an increase of 5% year-over-year. However, the consensus EPS estimate of $0.73 for the quarter reflects an alarming 38.4% year-over-year decline.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, for the fiscal year 2023, the company\u2019s EPS is expected to decrease 21.8% year-over-year to $3.18, while revenue is expected to come at $97.13 billion.<\/span><\/p>\n<p><b>Bottom Line<\/b><\/p>\n<p><span style=\"font-weight: 400;\">Over the past decade, TSLA has solidified its status as a top performer on the comprehensive S&amp;P 500 index, generating a significant return. Its consistent growth trajectory has elevated it among the most valued publicly traded corporations, with an estimated market cap of roughly $809 billion.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Moreover, the EV manufacturer seeks to diversify its revenue sources beyond the conventional sales and leasing of EVs, offering a crucial opportunity for it to enhance its profit margins through full self-driving subscriptions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Under the guidance of CEO Elon Musk, TSLA has been an instrumental force in sparking the EV revolution. However, the journey illustrates the inherent complexities involved with innovation, where vision is not always converging with actual execution. Musk's ambitious forecasts for self-driving technology have often not met expectations, emphasizing the challenges that come with pioneering advancements in automotive technology.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">TSLA\u2019s metamorphosis from a premium luxury automaker to a brand with mass-market allure embodies future opportunities and potential perils, particularly in light of emerging competitors in the global EV market, including agile Chinese companies.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">An assessment of TSLA\u2019s financial figures and market valuations seems to suggest an overvaluation compared to its industry counterparts. While the company's growth prospects partly back its valuation, its profit margins have faded. The prediction for its delivery and revenue for 2024 and 2025 could be significantly marked down.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Although substantial downward revisions in earnings per share EPS did not impact TSLA\u2019s stock this year, a possible slowdown in the growth narrative could put pressure on the stock\u2019s P\/E, currently at approximately 80x 2023 earnings, considerably surpassing other high-margin growth stocks.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Additional uncertainties stem from analysts' skepticism regarding TSLA's prospects, a matter of concern for existing or prospective investors contemplating TSLA's stock. Consequently, such investors may need to reevaluate their position before investing.<\/span><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>The automotive industry is undergoing one of the most significant technological shifts. The market for electric vehicles (EVs) is experiencing exponential growth, one that shows no signs of abating over the forthcoming decade. Strikingly, EV sales in the U.S. leaped over the 300,000 mark for the first time in the third quarter of 2023. Proving [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":41,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[33227,33221,33215,33220,33217,33224,33219,33214,33228,33222,33211,33223,33212,32139,33213,33209,33226,33218,33210,33225,33208,33216,4754],"class_list":["post-59146","post","type-post","status-publish","format-standard","hentry","category-general","tag-000-light-duty-evs","tag-000-model-3-and-model-y-in-the-third-quarter","tag-000-units","tag-33220","tag-33217","tag-67-of-u-s-citizens","tag-33219","tag-by-over-400","tag-ev-sales-in-the-u-s","tag-evs-could-account-for-62-to-86","tag-falling-used-ev-prices","tag-government-policies","tag-growing-dealer-inventories","tag-inc-tsla","tag-it-now-holds-a-mere-50","tag-model-y-may-be-impacted","tag-nearly-136","tag-new-ev-is-63","tag-no-longer-qualify","tag-one-million-evs-in-2023","tag-revealed-plans-for-the-model-2","tag-roughly-25-price-reduction","tag-tesla"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How Advances in EV Tech Could Shape TSLA&#039;s Stock Future Beyond 2024 - INO.com Trader&#039;s Blog<\/title>\n<meta name=\"description\" content=\"Tesla (TSLA) has achieved a commendable milestone, surpassing sales of over 2 million Model Ys \u2013 a milestone achieved in just over three years. 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