https://www.barrons.com/articles/tesla-low-priced-ev-could-come-2024-51663081989
Tesla stock is down with the rest of the market on a bad day for stocks. Tesla bulls have some reason for optimism, though, after what the company said at an investor conference.
Lower costs and a lower-priced electric vehicle are on the horizon.
Despite that message, stock in the EV maker fell 4% Tuesday, closing at $292.13 a share. It was a brutal day for markets after the August inflation number was higher than expected. The S&P 500SPX –4.32% and Nasdaq CompositeCOMP –5.16% dropped 4.3% and 5.2%, respectively. The Dow Jones Industrial AverageDJIA –3.94% fell 1,276 points, or 3.9%.
While investors focused on inflation, Tesla (ticker: TSLA) was talking at a Goldman Sachs investor conference. Tesla head of investor relations Martin Viecha said a few things of note.
For starters, he expects costs to trend lower over time. New factories producing at higher rates will help lower costs. So will a reduction in supply-chain problems, which have plagued the entire auto industry for years. Viecha added constraints in semiconductors and battery cells are easing.
Lower costs will also help Tesla produce a lower-priced EV, broadening its product line beyond the Model S, X, 3, and Y.
A lower-priced EV represents a big expansion of Tesla’s addressable market. Tesla’s average price for a vehicle in the second quarter came in at roughly $57,000, up about 13% from the same time last year.
That puts Tesla vehicles into the luxury category. The average car in the U.S. sells for roughly $45,000, but the bulk of new cars end up costing between $30,000 and $40,000.
“CyTruck is the priority for 2023,” says Future Fund Active ETF (FFND) co-founder Gary Black. CyTruck is Black’s short form of the Cybertruck, which Tesla expects to ship in early 2023. That has the potential to be a big sell, as Tesla has taken in hundreds of thousands of reservations for the truck. Still, that vehicle was unveiled in 2019. Buyers have been waiting a while.
Black believes a lower-priced Tesla EV could hit roads as soon as 2024. Tesla didn’t respond to a request for comment about timing.
“Tesla needs an affordable model to compete with BYD,” adds Black. BYD wants to ship about 2.4 million all-electric cars in 2023. The company has a few EV models that start under $32,000.
If BYD sells 2.4 million-all electric cars in 2023, it might unseat Tesla as the leader. Wall Street models about two million vehicle sales for Tesla in 2023.
Tesla investors can console themselves with valuation. Tesla’s market capitalization is about $930 billion. BYD’s is about $106 billion.
Tesla is more profitable than BYD. Analysts expect it to generate about $22.9 billion in 2023 operating profit, while they expect BYD to generate about $3.5 billion in 2023 operating profit.
