Mohit Oberoi
Tesla is reportedly looking to launch a lower-priced version of its Model Y and unveil its rumored Model 2 in 2024 as the company battles higher competition and a possible slowdown in demand.
In 2022, Tesla stock fell 65% and had its worst year ever. The company’s market cap plunged below $400 billion while its CEO Elon Musk lost $200 billion in net worth, becoming the first ever person to do so.
While one may blame the broader market sell-off, or as Musk believes rising interest rates, for the crash in TSLA stock, markets were also spooked by reports of slowing demand for Tesla cars.
Tesla suspended production in China in December amid multiple reports of slowing demand in the world’s largest automotive market. While in its response, Tesla China said that the plant has been suspended for maintenance work, markets did not buy the argument.
Incidentally, Tesla would again suspend production in January for the Chinese Lunar New Year. Usually, companies operating in China do plant maintenance work during the Lunar New Year holidays.
Even in the US, TSLA increased the discount for buyers taking delivery of Model 3/Y in December to $7,500. It also increased the credit to Canadian buyers to $5,000.
Tesla Might be Facing Demand Issues
Musk has categorically denied that Tesla is facing demand issues and said that the company is on track to increase its deliveries at a CAGR of 50% over the long term. Previously, he predicted that Tesla would deliver 20 million cars by 2030.
Meanwhile, analysts believe that TSLA would need to increase its addressable market in order to grow its sales. Currently, the company targets the luxury car market, and even the lower-priced Model 3 and Model Y, which account for the bulk of its sales, are not really cheap models.
Electrek reported that TSLA is looking to launch a lower-priced version of its Model Y in the US. Separately, Teslarati reported that Tesla would unveil its lower-priced model, which is rumored to be named Model 2, in 2024 while mass production would begin in 2025.
Cybertruck Deliveries to Begin in 2023
For 2023, Tesla might focus on its pickup model, the Cybertruck which was unveiled in 2019 and has missed production milestones amid global supply chain issues. The model would compete with multiple other electric pickups including F-150 Lightning from Ford, R1T from Rivian, and Endurance from Lordstown.
The battle between F-150 and Cybertruck would especially be worthwhile watching as the ICE (internal combustion engine) avatar of the former has been America’s best-selling pickup model for decades.
Due to the delays in the mass production of Cybertruck, Ford has taken the first mover advantage and started offering the F-150 Lightning in 2022. Ford stock also crashed in 2022 and even Adam Jonas, who is among the most vocal TSLA stock bulls, rates the stock as a buy. There is a guide on how to buy Ford stock.
Tesla Cars to Be Eligible for Federal EV Tax Credit
From 2023, Tesla Model 3 and Model Y cars are eligible for the federal EV (electric vehicle) tax credit. According to the Treasury Department, Model 3 is eligible for the $7,500 EV tax credit if the MSRP is below $55,000.
However, things are tricky when it comes to the Model Y SUV. While the seven-seat variants have an MSRP limit of $80,000, the limit is $55,000 for the five-seat variants which have two rows.
Analysts believe that the Inflation Reduction Act is a positive for Tesla stock. Many brokerages issued bullish notes on TSLA stock after the Act was passed and Wolfe Research upgraded Tesla stock to a buy and raised its earnings estimates.
Markets Await Tesla’s Q4 Delivery Report
Tesla would soon release its Q4 delivery report. Wedbush analyst Dan Ives who was once among the most vocal Tesla stock bulls lowered the company’s Q4 2022 delivery guidance to 410,000 vehicles, down from his previous forecast of 450,000. Consensus estimates call for deliveries of around 422,000 cars in the quarter.
Chinese EV companies including NIO, Xpeng Motors, and Li Auto released their December delivery reports over the weekend only. Their delivery reports looked encouraging especially given the COVID-19 disruptions in China.
As for Tesla stock, while Musk has agreed to step down from Twitter, it continues to be an overhang for TSLA investors. Twitter too has been in a sort of mess since Musk acquired the company and took it private.
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This article was written for Business 2 Community by Mohit Oberoi.
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