Tesla’s quarterly figures: Elon Musk’s main financier gives a negative conclusion

According to Morgan Stanley analyst Adam Jonas, it may be time for Elon Musk to revive old corporate behavior to rekindle Tesla’s spark.

Looking at Tesla’s first quarter results, investors are asking themselves: “Is it time to sleep on the floor again?” He says this in a letter published on April 18. He refers to the night that Tesla CEO Elon Musk has used this method in recent years. Musk wanted to encourage hard work in difficult times. A year ago, this would have been an unlikely comment from a long-term Tesla investor. But now more difficult times may be approaching again. Jonas admitted that the leading manufacturer of electric vehicles was hit by the economic downturn.

Given the dire situation and increasing competition, Tesla may even consider exiting the traditional electric car industry. The company recently decided to abandon plans for the Budget Model 2. Instead, they want to focus on autonomous driving and robotic axes. This decision shows the possibility of development.

Wall Street was not happy with this move. It even sent the stock to new highs for the year last week. “Is Tesla leaving the (conventional) electric vehicle industry? In some cases this seems to be the case. That doesn’t mean Tesla won’t be selling cars (including new models) for years to come. But that may not be the end,” Jonas wrote. He added: “Tesla’s annual growth rate of 50 percent is no longer valid.”

The electric vehicle market in general is facing challenges from various sides. These challenges include factors such as infrastructure, vehicle capacity and maintenance, and adding competition from the mix.

For Tesla, this isn’t just a domestic problem, as cheaper Chinese alternatives are undercutting significant foreign demand. Recently, this has reduced Tesla’s first quarter delivery. While these rose by 40 percent last year, they decreased by ten percent in the first months of 2024 compared to the previous year. As more industry players emerge, the company has reduced its prices. Musk has also been hinting at a model for years that will cost less than $30,000 (around €28,100).

Tesla is really planning a car for the mass market. This will be released from next year. Increased production will mean workers will have to sleep at the factory, Musk warned in the last earnings call. But even if the company manages to develop an attractive and affordable model, Jonas doubts that this will be a good strategy against the Chinese threat.

“How long will it take for a Chinese EV company to produce the model at a low price? Nine months? Three months? A little?†said Jonas. “New designs are important to Tesla. “We expect half a dozen different ‘shapes’ and form factors to come to market in the coming years,” he added. He also added, “But maybe Tesla has already learned what many auto analysts have long known about the auto industry.”

Investors should not rely solely on Tesla’s prospects in the field of self-driving cars. While some analysts have touted fully autonomous technology as a headwind for stock prices, Jonas sees the major commercialization of these developments as a long way off. Market challenges have already driven down Tesla’s stock price by more than 41 percent since the start of the year. Expectations for the deal first have to stabilize before the stock price gets better again, says Jonas.

He remains bullish on Tesla, with a price target of $310 (equivalent to about €290). In addition to earnings power, the stock’s success also depends on Musk’s compensation package, Jonas continued. The CEO previously threatened to remove AI capabilities from Tesla if he did not receive a 25 percent stake in the company. This represents uncertainty for investors, said the analyst.

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