New Year, Same Musk

New Year, Same Musk

about 1 year ago2 mins

Mentioned in story

Tesla announced over the weekend that it stalled last quarter, meaning Musk might have to go back to the drawing board this year.

What does this mean?

The control panels in Tesla HQ were probably flashing red as 2022 drew to a close – including the critical “Demand” meter, whose needle seemed to have slipped pretty far into the red zone. That drop could be why the firm took the unusual move of offering bumper incentives in its two biggest markets, the US and China, but it seems that was too little, too late. Sure, deliveries swelled 11% from the previous quarter to hit a record high of over 405,000, but they still fell short of the 421,000 analysts were expecting. That brought 2022’s deliveries 40% above the previous year’s – a far cry from the 50% average annual growth rate the company’s been crowing about.

Tesla deliveries
Source: Bloomberg

Why should I care?

Zooming in: Build it and they won’t come.

There’s never a good time for demand to slip, but you certainly don’t want it to happen shortly after opening two new plants. That extra factory space helped Tesla ramp up production, meaning it's now made more cars than it's delivered for three straight quarters. But over-manufacturing is hardly a sustainable business model in the current economy, and analysts reckon the company has two options: cut growth targets or double-down on price cuts – and neither prospect will appeal to the EV giant or its investors right now.

Production outpaces deliveries
Source: Reuters

For markets: Down but not out.

Tesla’s current trajectory – paired with Musk’s distracted Twitter antics – might explain why the EV manufacturer’s stock plunged nearly 40% in December alone. The firm even notched its worst daily drop since 2020 on Tuesday after the dismal deliveries news. Still, investors have far from abandoned the titan. After all, even after the drop, its price-to-earnings ratio – a key valuation metric – is still around five times that of rivals GM and Ford, reflecting the much greater speed that Tesla’s expected to grow at.

Tesla stock
Source: Google Finance
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