Tesla: Short Memories; Long Game
The headlines rolled in this morning - each one more dire than the last:
"Tesla Deliveries Decline for the First Time in Nearly Four Years" - Reuters
"Tesla's Grip on Market is in Doubt as Sales Slip" - NYTimes
"Tesla Shares Fall after Deliveries Drop 8.5% from a Year Ago" - CNBC
"Tesla Releases Q1 2024 Deliveries: Disastrous Results" - Electrek
We all have to grab eyeballs and clicks. I get it. And when we see a sales decline combined with a significant inventory glut, the picture does look, well, pick one: dire, ugly, catastrophic, dismal, etc.
There is an immediate need to explain the shortfall, the disappointment. The explanations come readily to hand: interest rates, consumer disdain for CEO Elon Musk's politics, cooling interest in EVs, intensifying competition, crappy customer service, a distracting minimalist in-cabin experience, lack of advertising, reckless Autopilot branding and deployment. Tesla had its own explanation(s): preparation of its Fremont, Calif., factory to handle increased production of an updated Model 3, and the brief shutdown of its Berlin plant due to Red Sea disruptions and an arson attack.
We should recall that CEO Musk, speaking during the company's fourth quarter earnings call, spoke of challenges facing the company in the coming year (2024) as it prepared to launch a new vehicle. He may have sounded a bit like a sand-bagging software coder ("Gee, boss, that's going to take at least two weeks."), but the cautionary note appears to be legit.
In spite of Musk's musings, the company managed to build 46,000 more cars than it sold - a first that the company might have preferred to avoid. Is an inventory overhang at Tesla good news or bad for Tesla or the industry?
I'd argue that a Tesla with too many cars is decidedly bad news for every other EV maker. While competing EVs are routinely falling short in evaluations, test drives, charging times, battery life, Teslas continue to perform and instill confidence and loyalty in their owners.
Teslas are increasingly popular for mobility and fleet applications from taxis and limousines to ride hailing and car sharing. A glut of Teslas could be resolved via a couple of strategic fleet transactions or a price reduction - though price reductions can cut both ways and have, hurting residual values and profitability.
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The longer term view, though, is even more terrifying. Car makers can already dimly perceive on the horizon a world in which consumers subscribe to cars rather than purchase or lease them. Even further off - but nevertheless perceptible - is a world where car makers give cars away and charge for services.
Tesla is much further along in the process of evolving toward a subscription-based or services-only model. Tesla has broken the code for extracting revenue from its EVs post-sale from feature enhancements and subscriptions. Tesla still has much to learn, but has more data to draw on as it evolves toward a mobility-as-a-service model.
All indications are that Tesla saw this disappointing sales quarter coming. The Tesla lemonade stand will turn the latest development to a buying opportunity for fans of its stock AND its cars. Bad news is always good news at Tesla where Musk plays the long game.
Deep Dive Teardown of the Tesla FSD Computer HW4.0 - https://library.techinsights.com/search/analysis-view/DDT-2307-807#pdfId=f8f1eaecc5f545a1b2a24966ee68ca99 - TechInsights
Vehicle Subscriptions Services Must Take 3 Critical Steps for Shared Model Transition - https://library.techinsights.com/search/analysis-view/ACM-2307-801#pdfId=08a58de7b9204ad997f6f9c9ddfe6279 - TechInsights
Global OEM Electric Vehicle Strategies: Divergence in Competing with China - https://library.techinsights.com/search/analysis-view/EVS-2403-802#pdfId=8a7f4ea55fbb41f98d808167cad01f52 - TechInsights
Global Car Sharing Market Overview - https://library.techinsights.com/search/analysis-view/ACM-2312-802 - TechInsights
Transforming Mobility Through Sustainable Funding & Innovation | Transportation Policy Strategist | Collaborative Leadership for Complex Challenges
11 个月Roger, thanks for the insightful, somewhat contrarian take on Tesla.?I agree, the strategic headlines paint a dire picture, but you make a good case that a Tesla with excess inventory may be bad news for other EV makers still playing catchup. ?The term "MaaS" stood out to me.? I agree Tesla is further along than others in understanding it and making a viable business case for a MaaS inspired subscription model.?However, as for gaining mass adoption, I think that is further out than even a dim perception would suggest. ?I know Volvo has Care by Volvo and prices are about $650 per month for a vehicle, the same model of which would cost $750/month to buy. ?Perhaps due to being an early Gen X’er, I prefer to pay the $750 and at least have a vehicle to sell once I’m through with it.? And younger generations who are more open to the model may not be able to afford it.? So, while I'm bullish on Tesla long-term and agree they’re quite ahead of the curve in monetizing services outside of the actual vehicle purchase, there are just so many other actors in MaaS to consider. I think the transition to it will be more gradual.? Like how we pay for roads (tolling, fuel tax, RUC), several models will coexist.??????
Catalyst for Innovation at Kerton Group; Founder: Autotech Council, Telecom Council, Cleantech Council
11 个月FSD is also beginning to be "real-world usable" quality. We can make fun of how "late" it is, compared to promises. But we need to understand how "early" it is compared to everyone else.
CEO at Radar Vision
11 个月Interesting, especially the dts. Looks though that they just decompiled it, so really hard to get all the detail without commenting it in detail, but at least RADARs are back in FSD!!! Seems like they made a U-turn in thinking the cameras are sufficient for collision avoidance at speed and at distance. I suspect they will learn some lessons on the Autobahn and Abu Dhabi with respect to camera and lane change assist... and add another 2 radars to the list.
Head of Adasky - North America
11 个月On point Roger. US consumers will buy EVs if the value equation works - good price, good range and reliability. Note Hyundai's EV sales last quarter - up 151%. The Detroit 3 needs to figure this out fast or it's not going to end well (again).
Executive Director - Global Automotive Practice at TechInsights
11 个月Thanks, Roger. It will be interesting to see how Tesla will react to the new offering from Xiaomi. Can it take advantage of the supposed six month waiting list to entice buyers in China?