Tesla falls on save-the-Earth letdown but analysts think legacy automakers may be in big trouble

Win McNamee/Getty Images News

Tesla (NASDAQ:TSLA) fell in early trading on Thursday as the electric vehicle juggernaut's focus at its Investor Day on long-term strategy and broad sustainability goals disappointed some investors looking for details on a mass market $25K model to disrupt the industry. The Master Plan Part 3 was largely a road map for a sustainable energy future for Earth, with a reiterated goal for Tesla to produce 20M vehicles a year.

The update on capital allocation was that supporting growth will be a top priority, with opportunistic M&A and debt reduction also in the mix. There is no clear direction on buybacks or dividends from the company.

One of the eye openers was that Tesla is targeting a 50% reduction in costs through its next-gen manufacturing processes and strategies.

Morgan Stanley said Tesla's (TSLA) audacious efforts on vertical integration are about to pay off with EVS far too expensive today.

"We leave the investor day at Giga Austin asking which of Tesla's competitors can keep up with the planned spending of upwards of $170bn for the build-out of their manufacturing base for EVs and stationary storage," updated analyst Adam Jonas.

Jonas saw a read-through for legacy automakers that could be frightening.

"Should TSLA be able to hit the cost targets laid out today, when coupled with its opex discipline, we find it hard to see a way in which legacy automakers could compete with TSLA in terms of EV profitability," he noted. That will be a question to watch as General Motors (GM), Ford (F), Toyota (TM), Honda (HMC), Volkswagen (OTCPK:VLKAF), Mercedes-Benz (OTCPK:MBGAF), BMW (OTCPK:BMWYY), Nissan (OTCPK:NSANY), and Stellantis (STLA) all spend heavily on electrification initiatives.

Wedbush Securities believes the Tesla (TSLA) presentation was a showcase event for the foundation being laid as the company being the EV leader in the present and future.

"For investors it's crystal clear just how far ahead Tesla is ahead of the rest of the auto industry when it comes to producing and scaling EVs with last night another display of the pure breadth and scale of Tesla globally," noted analyst Dan Ives.

As for the here and now, shares of Tesla (TSLA) fell 6.30% in premarket action on Thursday. Citi analyst Itay Michaeli said that while Tesla confirmed a 50% targeted cost reduction for its next-generation EV platform, the lack of detail around the new platform will likely be viewed as a letdown by investors.

Read through the highlights of the Tesla Investor Day.

Comments

[Take&run]

Automakers "may" be in trouble? Look at the auto stocks lol. Moreover aside from a handful of industries , everything is down lol

[Office Rat]

When are Teslarians going to realize that Tesla is an automobile production company, not a tech company? As an automobile producer, their quality control issues are far more serious than those of most tech companies. For example:

NHTSA opens safety probe into 120,000 Tesla Model Y crossovers for possible detaching steering wheels
NHTSA's Office of Defects Investigation said it was aware of two reports of 'complete detachment of the steering wheel from the steering column while driving.'
www.autonews.com/...

Fatal Tesla crash last month in Calif. probed by NHTSA
The fire department said a Tesla struck one of its fire trucks and the Tesla driver was pronounced dead at the scene.
www.autonews.com/...

And no, that was not the first Tesla to plow into a fire truck.

[Office Rat]

"Should TSLA be able to hit the cost targets laid out today, when coupled with its opex discipline, we find it hard to see a way in which legacy automakers could compete with TSLA in terms of EV profitability," he noted.

When has Tesla ever been able to hit any of its targets?

[georgefelix75]

To all the Musk fanbois the drop in prices is not due to running at full capacity and increasing demand.

[Amstragram]

Investors cheering a price war … everything Tesla is cognitive dissonance

[Dale Roberts]

Where's the beef?

Investors want to see plans, not promises.

Maybe they deliver, but who knows.

Past promises are blowing in the wind.

[Take&run]

@Dale Roberts lol blowing in the wind ? Read the sales and growth data versus the competition . What automaker is even close let along EVs ?

[Dale Roberts]

@Take&run I'd like to see them succeed in the future.

Chinese are growing faster. The collective non-Telsa EV space is growing faster.

All said, the space will experience incredible growth. Who knows how much they get?

Whoever builds a high-quality affordable EV will grab the majority of future sale. It might be Tesla. Might not.

[Take&run]

@Dale Roberts And WHO is going to do that ? Technology wise, production wise and future wise? Rivian - Ford - Toyota? Nope .. Look at the facts and the foundation Tesla currently has and the actual PLAN and product for the future . Look at EV sales data - not even close

[SuperPac]

TSLA - 2020s belong to them. Join the ride of the decade.

[Keto4me]

"For investors its crystal clear just how far ahead Tesla is ahead of the rest of the auto industry when it comes to producing and scaling EVs with last night another display of the pure breadth and scale of Tesla globally," noted analyst Dan Ives."

GM, F, TM, BMW etc much view this presentation and know they can never catch Tesla.

[Winnertakesall]

Stock will slide back to $100 in a few months, why throw your money away... sell.

[Robert Hennecke]

@Winnertakesall or short which I am contemplating now.

[Take&run]

@Winnertakesall I’d take that bet

[RobertLBarnard]

@Winnertakesall I'll buy it at $200, $400, and $100 (if I'm fortunate to see it again at that price).

[gutcheck]

noted analyst Dan Ives

noted for what ?

[jeffk100]

@gutcheck hype

[ckarabin]

How many claims has Tesla made over the years only for them to prove to be just blowing smoke? Like 1MM robotaxis and level 5 how many years ago? 5 year delays on product launches. Now they claim that costs will be reduced 50% and that nobody can match them, ever. Why do we believe this one? Meanwhile, Tesla is losing market share and unit growth is demonstrably slowing.

[Larry Hall]

@ckarabin How much revenue, profit, cash, vehicle demand, evidence of software, factory build-outs and new factories does it take for you all to realize you're wrong?

[Money&Money,LLC]

@Larry Hall Built off of highly inflated stock valuations

[ckarabin]

@Larry Hall It would look more like I have it right. Tesla unit growth is diminishing, new models delayed, Tesla entering the low price market delayed indefinitely. Tesla will do great but not enough to keep its share price up. Too overvalued.

[CR Spencer]

I only regret that I bought Tesla shares before the presentation. I had no idea that there would be a nice discount the morning after. Sure, just like the boss, many of the speakers said um and ahh far too many times to count but it was real. I've heard many slick presentations by practiced liars and this was not that at all. Many of these guys would have been passed over in other companies but I'm thankful they found their way to Tesla. They are good at what they do and not so good in presenting and that's fine with me.

Tesla has a cogent explanation of the direction that they're heading to and what it may take to get there. They also realize that circumstances will change and they will need to redirect from time to time. I would have enjoyed hearing more about their cars but it was not that meeting. Tesla will need to build more models but their approach should allow many to be built on common platforms. With a car's batteries on the bottom that allows any kind of car to be built on top.
They seem determined to have the lowest cost factories and they obviously have the biggest head start. Toyota could have done this but is late to the game. There will be strong competition from Chinese companies like BYD and Nio though. Remains to be seen how they will appeal to foreigners. Tesla obviously wants the world to use as many of its batteries as well. They will likely try to block their cars from being used as grid batteries as that would compete with Teslas Megapacks.

For the time being, expensive batteries work in Tesla's favor. It keeps cars with reasonable range at the higher price point where Tesla has a large advantage. Other companies aren't making much money selling BEVs while Tesla is building factories and getting ready to dominate auto sales worldwide. Musk stated that they can build and sell as many megapacks as they want to given the demand. One might wonder how true this actually is. Hard to imagine that the law of supply and demand has been repealed. It seems that if Tesla wanted to keep the price of batteries high they could build lots of megapacks. This would depend on contracts to some extent.

[solucky]

@CR Spencer

" I've heard many slick presentations by practiced liars and this was not that at all "

What have you seen ?

A bad copy of Desertec plans for an renewable world and the former solarworld CEO Asbeck " renewables are cheaper = endless growth " .

[CR Spencer]

@solucky I've seen slick presentations by politicians, salesmen, and corporate executives. I live in a town however where I had to talk a sales clerk into ordering a more expensive model for me. Frequently sales personnel will tell me to go to other stores where items are cheaper. This for sure ain't New York City!

[solucky]

@CR Spencer

" I live in a town however where I had to talk a sales clerk into ordering a more expensive model for me "

Seems the car business really work differrent in the US than in Germany....

Here you usually look to import dealers and their rebates ( as an example an VW imported from denmark back to Germany ).

After that compare it with online channels and ask your next 3 dealers for their best quote and trade in tariffs.

If you are a bit open to brand and models you still can get good cars for an acceptable price and thats not MSRP here.

as an sample APL

apl.de/...

[M.A. Levy]

The reason for the let-down at the investor conference is simple. Investors realized that Tesla is what it has always been: A car and battery company. It's not an AI company. It's not a robotics company. It's not an --insert whatever is sexy and hyped here-- company. It sells cars and batteries. As such, it should be valued at somewhere around 20x earnings at most (and that's being generous.) It's currently being valued north of 51x. This company shouldn't be over $100/share --which is about where Elon Musk was willing to sell billions of dollars of stock...

[gentiar]

@M.A. Levy I totally agree with you that Tesla is just an auto company. I agree with you that it also should be valued 80-120$ share at the moment. That said, momentum at the moment seems to be at Tesla's side as the other incumbent automakers are being clumsy and most of EV players (Rivian, Lucid, Nio, Xpeng, Rivian) are bleeding money and not making much progress. The real competition to Tesla is only by big chinese automakers. So market is valuing Tesla with a premium at the moment. How much this premium lasts is a matter of debate.

[M.A. Levy]

@gentiar STLA is doing very well. They are rapidly increasing production of BEV cars and have profit margins almost as high as Tesla. No fumbling there.

[gentiar]

@M.A. Levy I'd not even count Stellantis as a serious auto company. I've driven Jeep, Fiat, Lancia, Alfa Romeo and Peugeot. All shitty cars. Stellantis will risk bankruptcy let alone be a credible threat.

[georgefelix75]

What one man can do another can do. Being ahead of the game is quite different than the “game over” concern. Don’t take my word just ask IBM and Motorola.

[cmyhydrangeas]

And perhaps we will figure out how to get electricity out of the quartz crystals in the pyramids before we run out of electricity generation capacity. Or perhaps Yellowstone volcano will erupt, a large asteroid will hit, or a solar flare will nock out the grid and make the question moot. Joy

[RobertLBarnard]

@cmyhydrangeas Obviously didn't want the presentation, at least the Tesla Energy division. They've generated much more energy than needed to recharge all Tesla cars for all the miles driven.
This is also the part of the company that is taking off quickly with sales.

[Packsmack]

20M vehicles a year? Not a serious goal. 66 million new cars sold worldwide in 2022. You're telling me 1/3rd of the cars sold in the world will be Tesla's in the future? Not a chance.

[Elon the GOAT]

@Packsmack 1/3 is actually being conservative. I think it’s safe to bet over 50% of new cars sold will be Tesla, as long as they release more models. If there is a 25k car Tesla will own 95% of the new car sales

[Packsmack]

@Elon the GOAT 16x-ing their production would be hard enough. But, Tesla increasing their market share like that is literally a 0% chance. They have had limited competition in the electric space and that's going to be changing over the next decade.

[p.investment]

@Packsmack cars vs vehicles

[Diesel]

Tesla will destroy them all in due time.

[Take&run]

@Diesel They already are in the EV space!

[ronald61239]

Tesla is simply looking to catch up to GM that is selling cheap kitty cars in China in partnership with the Chinese Gov.

[Robert S Dot]

spoiler alert: it‘s feasible.

[Take&run]

@Robert S Dot they doing it !

[User 56360468]

Until Tesla offers a large, medium and small SUV priced comparably to gas-powered SUVs, or a car under $30,000, it's not going to take over the world. It may rule its niche market, which is virtue signaling upper middle class and middle class people who we used to call "Yuppies". The people living in luxury high rise condos or in a suburban McMansion, probably with a gas-powered large SUV sitting next to their Tesla. The dad often drives the Tesla while "Wine Mom" drives the kids to Lacrosse, Tennis or Soccer in the SUV. Their home is adorned with every Apple device that's been for sale in the last 10 years.

I'll believe they can make a battery and a car without rare minerals causing catastrophic environmental damage when I see it roll off the assembly line for sale to the public. Not before then.

[Orangejulius]

@Found.Alpha Congrats, you made me giggle at the "Wine Mom" comment. This description definitely fits a portion of suburban Tesla owners.

[Stockpiker]

@Found.Alpha Under $30K for a new car?

[Orangejulius]

@Stockpiker Chevy's Bolt EV and Bolt EUV both start well under $30k, not even counting the tax credit.