Tesla targets mass market to reignite growth
DESPITE the triumph of its Model Y medium SUV being Europe's – and likely the world’s – best-selling car last year, Tesla has represented something of a shareholder bloodbath in recent weeks.
This was topped by a substantial stock price plunge when a less-than-positive picture emerged from Tesla’s quarterly earnings report last week, with word of Cybertruck production eventually ramping up to 250,000 units per year and the addition of a new-generation, more affordable passenger model doing little to encourage Wall Street.
A year of cutting prices to fend off pressure from increasing competition combined with punishing inflation and interest rate rises in major markets eroding affordability for consumers resulted in Tesla missing its financial forecast and admitting that its rate of growth will slow in 2024.
Not even Tesla CEO Elon Musk’s hyperbole about the brand’s new entry-level model – unofficially dubbed Model 2 – that is scheduled to enter production in the second half of 2025 could provide a parachute for a stock price that has now declined for six consecutive weeks and is now trading at lows not seen since last April.
Still, Tesla’s $US574 billion ($A873.5b) valuation far outstrips that of the world’s biggest by volume, Toyota, which has a market capitalisation of $US318.4b and is estimated to have sold 11 million cars in 2023 (Tesla says it delivered 1.8 million vehicles last year).
Mr Musk described Tesla as “between two major growth waves” and that there was “a lot to look forward to in 2024”.
“We're very far along on our next-generation low-cost vehicle,” he added.
“This is really going to be profound, not just in the design of the vehicle itself, but in the design of the manufacturing system … far more advanced than any other automotive manufacturing system in the world by a significant margin.”
Unusually, Tesla also declined to forecast specific targets for 2024, possibly due to sales volume growth of 38 per cent – still a staggering achievement by most car-maker standards – missing the 50 per cent guidance offered by company executives in the past.
This, against the price cuts eating into profit margins, resulted in a $US25.2 billion ($A38.33b) figure for the fourth quarter of 2023, translating into earnings of $US0.71 per share – a couple of cents lower than expectations.
However, Tesla’s energy storage business installed 14.7GWh of capacity in 2023, up 125 per cent.
Preliminary analysis by automotive data firm Jato Dynamics has named the Model Y the world’s best-selling car, a statistic also shared in the Tesla quarterly report, which said 1.23 million units had been delivered last year.
Were Jato’s estimate that 1.07 million Toyota RAV4s were sold in 2023 to prove accurate, the Model Y will become the first battery electric model to be named Earth’s most-popular car.
In Europe it is not only the first battery electric vehicle and the largest car to top the continent’s sales charts but also the first from a non-European brand to do so in decades.
Tesla’s ‘Model 2’ could replicate that feat in a market skewed toward smaller vehicles but Mr Musk said it would first go into production at the Austin plant in Texas.
Mr Musk and other executives on the earnings call said ‘Model 2’ production would be perfected at Austin before other plants came online, with work on the planned Mexican plant to only commence once Tesla was satisfied with the new production method.
“We want to first demonstrate success with the next-generation platform in Austin before we start construction,” said an unnamed executive on the earnings call.
“Therefore, we have started the long-lead work to get the basics ready and plan to follow our recipe from the 3Y ramp with Shanghai, where we started with learnings from Fremont and ramped really quickly.”