^{Author | T800 Recently, the authoritative American publication Time magazine announced the list of the world's most influential top 100 companies, with Huawei, BYD and China's Transsion ranked among them. For Huawei and BYD's inclusion, it is believed that the public generally holds a recognized attitude, and the strong strength displayed by these two companies in their respective fields is obvious to all. However, for the brand of Transsion, except for some netizens in Shenzhen, it is believed that the public in other parts of the country are still unfamiliar with it. Transsion's exposure in the domestic market is relatively low, and many people are not familiar with its business scope. In the past China's top 100 companies and other lists, we rarely see its presence. Faced with such a relatively unfamiliar brand in the public eye, people may have questions about its inclusion in Time's list of the world's 100 most influential companies. However, although the brand awareness of Transsion may not be as well-known as Huawei, BYD and other well-known companies, and even unable to compare with DJI which is a well-known local enterprise in Shenzhen, its influence in the mobile phone field, especially in Africa, cannot be underestimated. Why is Transsion listed at the same time as Huawei and BYD? 01 Hidden Chinese mobile phone giant In the turbulent global smart phone market, Chinese power is rising at an unprecedented rate. According to the latest data released by Counterpoint, the global mobile phone shipments will reach as high as 296 million units in 2024, an increase of 6% year on year. Behind this growth wave is a behind-the-scenes Chinese mobile phone manufacturers. However, in this wave of growth, a low-key and mysterious figure is particularly noticeable, Transsion - a Chinese mobile phone brand known as the "African King of the mobile phone". In the fiercely competitive smart phone battlefield, Samsung and Apple are undoubtedly two old giants. However, in the first quarter of 2024, these two giants showed a rare trend of declining shipments. Samsung's mobile phone shipments were 60.10 million units, a year-on-year decline of 0.7%; Apple's mobile phone shipments were 50.10 million units, a substantial year-on-year decline of 9.6%. Against the backdrop of a slight increase in global smartphone shipments, such data is undoubtedly shocking. Meanwhile, China's phone makers are showing a prosperous picture. Xiaomi, as one of the leaders, shipped 40.80 million units in the first quarter, an increase of 33.8% year on year. However, the most eye-catching performance comes from Transsion. In this quarter, Transsion's intelligent phone shipments reached an amazing 28.50 million units, a year-on-year increase of as much as 84.9%! This figure not only allows Transsion to successfully surpass OPPO and vivo, but also smoothly enters among the top four global smartphone shipment lists, completely getting rid of the embarrassing ranking of "others". Having seen this data, many netizens may feel puzzled. In the domestic market, we seldom see Transsion's presence. Why is its sales volume so large? Did Transsion's sales data fraud? Actually, the answer is simple. Since its inception, Transsion has positioned its target market in emerging markets such as Africa. In this market, which is overlooked by many people, Transsion has successfully created mobile phone products that meet the tastes of local consumers through deep insights into and accurate grasp of local consumer demands. In the African continent, the most popular mobile phone brand is not Apple, Samsung or Xiaomi, but Transsion, which has no reputation in the country. After more than a decade of development, Transsion has achieved remarkable results in the African market. Currently, in the sub-Saharan Africa market, Transsion's market share exceeds 40%, which is equivalent to 4 out of 10 smartphones sold in these markets being from Transsion. Even international giants like Apple and Samsung are difficult to reach such results. Transsion's success is not accidental. They know well the characteristics and complexity of the African market, so they have carried out in-depth localization exploration and innovation in product development, marketing and other aspects. For example, they have developed mobile phone cameras with powerful beauty functions for African users' skin color characteristics; for the problem of unstable power supply in Africa, they have launched mobile phone products with large battery capacity and long standby time, in addition, they have also provided rich localized service support to cater to African users' language habits and cultural characteristics. These considerate designs and services have won widespread praise and recognition for Transsion in the African market. Nowadays, Transsion has become the "mobile phone king" in the African market. They have not only established a complete sales network and after-sales service system locally, but also gradually expanded their business scope to South Asia, Southeast Asia and other regions through continuous innovation and expansion. It can be said that Transsion has embarked on its own path of global development. 02 The most understanding mobile phone brand in African markets.
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Unexpectedly, the biggest enemy of Tesla comes from inventory.

Recently, Tesla has encountered a significant dark force - stockpile. This dark force not only makes Tesla's growth trajectory blurry, but also puts its high valuation (PE ratio up to 67 times) to a severe test.

Tesla, which was once known for innovation and growth rate, is now stuck in the mud of inventory. In just three years since 2021, Tesla's inventory amount has soared from about 5 billion US dollars to more than 16 billion US dollars. This is not just a numerical leap, but also a huge turning point in Tesla's business strategy. With the rapid expansion of business, the increase of inventory is reasonable, but the premise is that sales can increase synchronously. However, reality has given Tesla a loud slap. Since early 2024, Tesla's sales have not soared as expected, but have formed a sharp contrast with the growth of inventory.

What's even more worrying is that Tesla's inventory days (DOJO) have reached a record-breaking 77 days. Before 2024, this number was stable at around an average of 57 days. This surge in inventory is not due to weak demand for cars, but due to the complexity and uncertainty of the global logistics network. Tesla's cars, like being stuck in a huge maze, cannot find a smooth road to consumers.

Imagine rows of brand-new cars parked neatly in Tesla's super factory parking lot. They should have galloped on the road to bring the convenience of travel to car owners. However, these cars can only wait quietly in the parking lot, like forgotten orphans of time. More exaggeratedly, according to insiders, these parking lots have become overcrowded and even their huge figures can be seen from space.

Tesla's predicament was not unannounced. Earlier, Tesla's CFO, Vaibhav Taneja, admitted, "The main factor causing this situation is the increase in inventory caused by unmatched construction." He tried to give investors a confident promise: "We expect inventory to reverse in the second quarter and free cash flow to return to positive." However, reality has given him a loud slap.

In the past quarter, Tesla has produced more than 433,000 cars, but delivered only 386,000. This means that Tesla's warehouse has piled up about 47,000 unsold cars. These inventories not only occupy a large amount of cash, but also bring huge risks to Tesla's balance sheet. Tesla's free cash flow reported in the last quarter was negative $2.5 billion, a figure that is shocking and alarming to investors.

Tesla's dilemma is not just about inventory backlog. It is a complex problem involving supply chain, market demand, production capacity planning and many other aspects.

1

The dilemma they face is more severe than imagined.

Tesla was once an unbeatable wild horse, leading the trend of the industry with its astonishing innovation speed and excellent performance. However, now this wild horse seems to be bogged down. The seemingly simple problem of inventory has become Tesla's biggest enemy.

Not long ago, Tesla handed in a stunning report card: producing more than 433,000 cars in one quarter, a number that can make any competitor look pale by comparison. However, what is shocking is that the delivery volume is only 386,000. This means that Tesla's warehouse has piled up about 47,000 unsold cars. These cars, like treasures forgotten by time, lie quietly in the corner of the warehouse, waiting for the judgment of fate.

This huge inventory backlog is undoubtedly a heavy blow to Tesla. It occupies a large amount of cash and brings huge risks to Tesla's balance sheet. What's worse, due to the inventory backlog, Tesla's cash flow situation has also been severely affected. According to the company's report, free cash flow was negative $2.5 billion in the last quarter. This figure, like a loud slap, hit Tesla's face.

Faced with such a severe situation, Tesla's CFO tried to bring some comfort to investors. He confidently said that inventory backlog is expected to reverse in the next quarter and free cash flow will return to positive. However, analysts are skeptical. They believe that inventory backlog is a more persistent problem and may last longer. This suspicion is not groundless, and Tesla's inventory data clearly reflects this.

Tesla's inventory problem has had a greater impact than expected. Analysts predict that due to the slowdown in sales growth, Tesla's sales will be lower than the delivery growth of over 30% recorded recently. The prospects for this slowdown in growth have raised questions about Tesla's premium valuation. In addition, as competition intensifies, sales prices fall, and operating costs increase, Tesla's bottom line growth rate may also be lower.

Let's take a look at analysts' forecasts for Tesla in the coming years. According to general predictions, Tesla's earnings per share are expected to decline 18.56% to $2.54 in fiscal year 2024. This prediction is shocking, as Tesla has always been seen as a high-growth company by investors. However, reality has given investors a loud slap in the face. Even if Tesla's earnings per share can grow at a compound annual growth rate of 19% over the next five years, the price-to-earnings growth rate (PEG) will still be more than 3.5 times, far higher than the 1x gold standard growth sought by investors.

In addition to financial issues, Tesla also faces other challenges. As a high-tech growth company, Tesla needs to increase its research and development efforts to maintain its leading position. However, at present, Tesla only spends about 4.6% of its revenue on research and development, which is still lower than its historical average or other high-tech companies. This means that Tesla's investment in research and development may be insufficient to deal with the increasingly fierce competition.

In addition, Tesla needs to effectively control its operating costs. In recent quarters, Tesla's operating costs have been increasing rapidly. Although the company has some cost control plans to improve operational efficiency and reduce the cost per vehicle, the effectiveness of these plans remains to be seen under the pressure of high labor, material, and energy costs.

2

Tesla's sales have taken a big hit.

A recent report by Sherwood News reveals the hidden concern behind Tesla's stockpile of inventory - plummeting sales.

The Nevada Tesla Gigafactory in Texas. Comparative satellite images provided by SkyFi satellite imaging service show that from October 2023 to March 2024, the parking lot around the factory experienced an amazing transformation from partially full to completely full. In October 2023, the parking area in the lower left corner of the factory was still empty, and the parking rate in the middle right area was only 17%. But in just a few months, by March 2024, the parking rates in these two areas had skyrocketed to a stunning 34% and 97%!

This is not just a problem for the Texas Gigafactory. Tesla also faces the same problem in other parts of the United States. For example, the satellite image provided by Sherwood News shows that the parking lot outside Chesterfield Mall in St. Louis was empty in October 2022, but by May 2024, it was filled with nearly 500 Tesla cars. These unsold cars are like silent tombstones, silently telling the cruel reality of Tesla's sales downturn.

Faced with such a situation, an automotive supply chain practitioner couldn't help but sigh, "Automakers often expand their production capacity in advance to reduce costs. But doing so is like walking a tightrope, where a misstep can lead to overproduction and trouble." Tesla is an example of this. Despite being the leader in the US electric car market, it is now facing the dilemma of lower-than-expected sales.

From the sales share of the global market, Tesla's dilemma is even more evident. In the first quarter of 2024, although Tesla's sales share in the US electric car market was still as high as 51.3%, its sales volume fell by 8.53% year-on-year and 20.2% compared with the fourth quarter of last year. This means that Tesla's growth momentum in the US market has clearly slowed down.

At the same time, the entire US electric vehicle market has also experienced its first decline in four years. According to an evaluation by research firm Wards Intelligence, in the first quarter of 2024, the proportion of hybrid cars, plug-in hybrid electric cars, and pure electric cars in total light vehicle sales in the United States fell from 18.8% in the fourth quarter of 2023 to 18.0%. This downward trend has not only affected Tesla, but also the entire electric car industry.

So, what has caused Tesla's sales to slump? Insiders in the industry have given an answer. On the one hand, American consumers have limited acceptance of pure electric vehicles. Compared with hybrid models and gasoline vehicles, pure electric vehicles still fall short in terms of cost-effectiveness and convenience. On the other hand, American consumers prefer SUVs and pickups, which are relatively rare in the pure electric vehicle field.

This trend was also confirmed in the 2024 Consumer Reports ranking of preferred cars by consumers. Of the top 10, six are hybrid models and only one pure electric Model Y made the list. This ranking undoubtedly sounded the alarm for Tesla - in the increasingly picky consumer market, Tesla must continue to innovate and improve to maintain its leading position.

Tesla's sales slump and inventory backlog problems are looming. Faced with this dilemma, Tesla must take effective measures to deal with it.

3

Main sales model Y does not have a new style

Recently, Tesla CEO Musk has explicitly stated on social media that the 'redesigned' version of the Model Y will not be launched this year. This news not only disappoints countless Tesla fans but also exacerbates the inventory backlog problem of Tesla.

The Model Y is the core of Tesla's sales in the Chinese market and has attracted numerous consumers with its excellent performance and fashionable appearance. However, in this era of rapid updates, if a model cannot maintain continuous innovation and progress, it is easy to be left behind by competitors.

Let's first take a look at Tesla's performance in the Chinese market. As Tesla's second-largest market globally, Tesla's retail sales in China reached 132,400 vehicles in the first quarter of 2024, a seemingly large number, but a year-on-year decrease of 3.64%. In May, Tesla's Shanghai Super Factory delivered 72,573 new cars, with sales in China exceeding 55,000, an increase of 77% month-on-month and 29.9% year-on-year. Although this data seems impressive, sales in the first five months still decreased by 0.5%, a trend that is worrying for Tesla's future.

So why did Tesla's sales decline? Western Securities auto analyst gave an answer: 'In the domestic market, many automakers will regularly launch redesigned models to keep them fresh. But Tesla seems too conservative, perhaps only redesigning once every two or three years. Although the new Model 3 high-performance version was released in April, this model is difficult to impress consumers from positioning to price.'

As the mainstay of Tesla's sales in the Chinese market, the Model Y has received close attention from the market. According to data, Model Y sold about 100,400 vehicles in China in the first quarter of this year, accounting for 80% of Tesla's total sales. However, facing such an important model, Tesla chose not to launch a redesigned version this year. This decision undoubtedly exacerbates Tesla's inventory backlog problem.

Musk explained on social media that Tesla continuously upgrades existing vehicles through OTA and other methods, and Tesla vehicles will have obvious improvements in many aspects every six months. However, this explanation does not seem to convince consumers. In today's increasingly competitive new energy vehicle market, consumers are more eager for new models and technologies. Tesla's 'conservative' strategy undoubtedly puts it in a disadvantageous position in the competition.

In addition to slow product updates, Tesla also faces competition pressure from the domestic new energy vehicle market. Nowadays, a number of outstanding domestic automakers and models have emerged in the new energy vehicle market. Models such as Xiaopeng G6, Zhiji LS6, BYD Song L, and Ledao L60 are engaged in fierce competition with the Model Y. And new models such as Xiaomi Pure Electric SUV and Avita 07, which are about to enter the market, have put Tesla under unprecedented pressure.

In such a market environment, Tesla's declining sales and inventory backlog problems have become more challenging. Faced with constant challenges from competitors and increasingly demanding consumers, Tesla must find a solution as soon as possible. Otherwise, this once-leading company may be left behind in the future road.

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^{The article reflects the author's personal opinion}

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