Tesla CEO Elon Musk uses a mobile device in his car arriving at a construction site. … (+)
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Tesla posted questionable results in 2024, the first time in the company’s history that annual shipments of electric vehicles declined, according to Reuters.
Tesla’s stock fell 6% on Jan. 2 as annual deliveries fell 1.1% after CEO Elon Musk predicted “some growth” in 2024, Reuters reported. pointed out.
Why did Tesla fall short of expectations? In short, car buyers have no obligation to buy an EV from Tesla. To do that, the company needs to beat out its competitors, some of which have achieved solid growth in terms of shipments in 2024.
Different buyer groups have their own reasons for purchasing Tesla EVs. For example, as I wrote in a July 2020 Forbes post, early adopters endured many technical problems because they wanted the attention that comes with owning an EV in the first place. Analysts told The Associated Press that they are almost done buying EVs.
In contrast, most mainstream buyers are less enthusiastic. They are “concerned about range, price and the ability to find charging stations on long trips,” the Associated Press noted.
From 2014 to 2023, Tesla’s annual EV shipments grew at an average annual rate of 56.7%, according to my analysis of data provided by Reuters.
This begs the question for investors: Why did Tesla’s rapid growth reverse? Can Tesla’s earnings accelerate? If not, will Tesla’s stock, which soared 74% in 2024, continue to rise?
Simply put, I think there are at least five reasons for the slowdown. Earnings may only recover if Tesla provides a compelling reason to buy against competitors, and as long as Mr. Musk remains popular and powerful, Tesla’s stock price could continue to rise. .
We’ve reached out to Tesla for comment and will update this post if we hear back.
Tesla’s Growth Reversal: 5 Whys Analysis
Tesla’s EV shipments fell in 2024, falling short of investors’ expectations of about 1% growth.
Specifically, Tesla shipped 1.79 million EVs in 2024, which was 1.1% below the 1.81 million in 2023, compared to an estimate of 180 by 19 analysts surveyed by London Stock Exchange Group. Reuters pointed out that the figure fell short of 16 million units.
Here is my preliminary 5 why analysis.
Why did Tesla’s EV shipments decline in 2024? Year-end incentives for Tesla’s aging lineup, such as interest-free financing and free fast charging, and the new Cybertruck pickup truck may not be able to attract customers. Reuters pointed out that there was no. Why did Tesla’s incentives and the Cybertruck fail to attract customers? Subsidy cuts in Europe, the shift to lower-cost hybrid vehicles in the United States, and increased competition, especially from China’s BYD, led to Tesla’s incentives Reuters pointed out that this is casting a shadow on the attractiveness of Japan. Why did customers turn to hybrid cars and BYD EVs?Consumers turned to hybrid cars for affordability, practicality, and the balance between fuel economy and reliability of gasoline engines. According to a report by Urban Science, concerns include EV charging infrastructure, range anxiety, and rising prices during times of economic uncertainty. Additionally, BYD’s EV shipments increased by 12.1%, reaching 1.76 million units in 2024, outpacing the EV market’s 7.2% growth through September 2024, according to the Associated Press, Reuters noted. Why has BYD’s EV growth outpaced Tesla’s? BYD leverages vertical integration, economies of scale, and cutting-edge battery technology to offer consumers new designs at lower prices than Tesla. However, this has turned off potential buyers who don’t share Musk’s political views, Campaign Asia reported. Why hasn’t Tesla responded to the changing consumer preferences that have driven demand for hybrid and BYD products?Tesla predicts 20% to 30% sales growth in 2024, but low Rather than compete for high-income customers, they are marketing self-driving taxis. Morningstar analyst Seth Goldstein told The Associated Press that in order to meet its growth guidance, Tesla needs to reach “more mainstream buyers who may be considering gas-powered, electric or hybrid vehicles.” “We need to offer a car priced in the mid-$30,000 range to appeal to consumers,” he said. Musk’s support for President-elect Donald Trump “could turn off some environmentally conscious, Democratic-leaning buyers,” Jeff Schuster, vice president of Automotive Research Global Data, told The Associated Press. Ta. Reuters reported that Musk said he would use his role in the Trump administration to push for federal approval of self-driving cars rather than state-by-state approval.
Can Tesla return to rapid revenue growth?
Analysts are divided on whether or when Tesla’s growth will accelerate. “We’ve never looked at Tesla as just a car company,” Wedbush financial analyst Daniel Ives said in a report featured by The Associated Press.
Tesla stock deserves more recognition for the company’s promise to develop fully autonomous self-driving cars and its AI technology, and it’s still a good buy despite declining sales. We’ve always seen Musk and Tesla as world leaders in disruptive technology. And the first part of this grand strategic vision has taken shape,” Ives added.
Mr. Goldstein and Mr. Schuster suggested that Tesla’s goal of 20% to 30% sales growth in 2025 will not be achieved. After all, with Musk talking more about self-driving taxis (which are unlikely to hit the market in 2025), Tesla may have a hard time meeting that goal.
Despite promising to sell cheaper EVs this year, Tesla hasn’t done much to live up to expectations. According to the New York Times, Tesla said it would “start selling cars in 2025 for just $25,000.” However, the Times noted that Tesla has not displayed a prototype and Musk has not provided many details about the project.
Unless Tesla ramps up production of these models soon, it’s unclear how Tesla will achieve significant growth this year.
Will Tesla stock go up?
Analysts believe Tesla stock is overvalued. TipRanks notes that based on 12-month price targets from 33 Wall Street analysts, Tesla stock would need to fall approximately 28% to reach the average price target of $292.03. are.
Analysts have four opinions:
Tesla’s profits are not commensurate with the stock price. Tesla “isn’t making enough profits to justify the stock price,” Leonard Kostvetsky, an associate professor at Baruch College’s Zicklin School of Management, told the Times. “People are justifying it based on things that are going to happen in the future.” Tesla’s market value is greater than the next 20 largest automakers combined. Tesla’s market capitalization of $1.2 trillion is more than the next 20 largest automakers combined, according to S&P Global Market Intelligence data published in the Wall Street Journal. Two-thirds of Tesla’s market capitalization is based on pure promise. When Tesla’s market capitalization peaked at more than $1.5 trillion last month, about $1 trillion of that was implied revenue from “what’s to come,” said Chris McNally, an analyst at Evercore ISI. estimated in a report in the journal. Tesla stock could fall as its price exceeds its fundamentals. Animal spirit and momentum are driving Tesla’s stock higher, and the stock is likely to enter a “downside channel” “after the company’s market capitalization significantly exceeded its fundamentals over the past period,” UBS analysts say. , noted Joseph Spack in a November report.
As long as Mr. Musk remains politically powerful, Tesla’s stock price is likely to rise. Otherwise, investors should note the following:
