Destroyed on the stock market, Tesla hoped to turn its strategy

Automaker Tesla, which publishes its quarterly results on Tuesday, is going through a turbulent period amid increased competition and a weaker-than-expected electric car market, leaving analysts heated and full of questions about its strategy.

Since the beginning of April, the American group has been all over the place with sporadic, sometimes cryptic official announcements, and many leaks and rumors in the media.

In particular: the dismissal of around 10% of the workforce – or around 14,000 positions eliminated -, disappointing deliveries and production in the first quarter, price cuts, delivery of robotaxi, recalling the future takeover of the Cybertruck, or even the possible abandonment of the car inexpensive.

The market crashes, stocks fall.

Its market capitalization has fallen 40% since the start of the year, to $468.20 billion as of Monday’s close.

“Everyone is waiting for what Elon Musk will say” about Tesla’s strategy, about its new products or even about the situation in China, Stephanie Valdez Streaty, director of Industry Insight at Cox Automotive, tells AFP.

“Tesla has been incredibly successful in accelerating the adoption of electric vehicles. They’ve actually been instrumental in creating this power,” but now “they’re telling us what their plan is,” he adds.

Is Tesla “a car group, a technology group, an artificial intelligence group?”, he asks.

To get answers, he counts, like other analysts, on a conference call with management on Tuesday, following the publication of the results of the first quarter after the close of the New York Stock Exchange.

The billionaire will have to give a “clear message” about the group’s strategy. “It is important” but, he says, there is no certainty with Elon Musk.

“International transition”

“Tesla exists to accelerate the global transition to sustainable energy,” the billionaire wrote Monday on X (formerly Twitter).

“Happy World Day,” he added, hours after greeting the tenth anniversary of the first Model S delivery to China.

The Chinese market is giving it a difficult time, due to the emergence of strong competition in recent months from local producers, including international ones.

Thus, BYD grabbed the title of the world’s largest electric car seller in the fourth quarter.

But honor is safe: Tesla Model Y was the best-selling car in the world in 2023, the first for an electric car.

And this in a slightly stronger market than expected, at least in the United States.

Between January and March, the manufacturer presented fewer cars than a year earlier and, above all, far fewer than expected by analysts. Production was also depressed, falling by 8.5% in one year.

The decline that the company explains to the launch of a new version of the Model 3 at its factory in Fremont (California), to sabotage after closing its German factory – its only production site in Europe – for several days and to supply concerns linked to the instability of shipping in the Red Sea caused by the Houthis.

But JPMorgan analysts “give little credence” to this justification, saying in particular that Tesla’s stocks have never been so high.

“Restore demand”

This is undoubtedly the reason for the price reductions introduced this weekend in Europe, the United States and China.

“They aim to revive demand and reveal that the weakness in demand is not over,” Bank of America analysts said in a note on Monday.

These price drops should weigh on Tesla’s side. Especially since it has done several jobs in the US in 2023 to make its cars more affordable in the context of high inflation and high interest rates.

According to Factset, the average price for all models included was $42,110 in the first quarter (before the weekend drop), compared to $46,000 a year earlier.

For analysts, Tesla could get a second wind with a low-cost car called “Model 2” – around $ 25,000 – but its future seems uncertain.

The media reported at the beginning of April that the group had given up, which Elon Musk seemed to strongly deny.

Price “is one of the biggest obstacles. This industry needs more products under $30,000,” noted Mrs. Valdez Streaty.

On the other hand, the billionaire is determined to make his own robot, a 100% autonomous car. It should launch in early August but shouldn’t hit the road for several years.