Since the beginning of this year, Tesla has experienced a roller coaster-like stimulation in its performance.

From the beginning of the year to mid-April, Tesla's stock price fell by more than 40%. Although the stock price rebounded after the first quarter report, it then entered a two-month consolidation period. At the beginning of July, Q2 car sales exceeded expectations and drove stock prices to rise rapidly, once wiping out the year's decline. However, influenced by the rotation of US stocks, the stock price fell 22% again from the high point in mid-July.

Compared with its peers, Tesla's stock price has dropped by 16.4% this year, significantly underperforming the S&P 500 and the Nasdaq, which declined by 13.9% and 14.5%, respectively. Unfortunately, it has become the only company among the 'Big Seven' of US stocks whose stock price has fallen this year.

With its weak stock price performance, the major Wall Street banks have given Tesla a 'sell' rating, and many analysts hold a pessimistic view on its future stock price performance.

The prosperous scenes that were once favored by capital and investors are still vivid in our minds. When will Tesla reach a turning point?

Is Tesla no longer attractive due to the pressure of declining car sales?

Once, Tesla, which had been running wildly based on its impressive sales performance, now faces the problem of slowing sales growth. According to statistics, from 2021 to 2023, Tesla's global sales growth rate continued to slow down, with year-on-year growth rates of 87%, 40%, and 38%, respectively. In the first quarter of this year, Tesla sold 386,810 cars, a year-on-year decrease of 8.5%, and the first time it has decreased since 2020Q2.

In order to cope with the decline in sales, Tesla has taken a series of measures, such as price reductions and low-interest financing. The sales decline in Q2 narrowed to 4.8%, which was better than the predicted 15% decline by Wall Street.

However, it seems difficult to reverse the trend of declining sales, and the entire electric vehicle market is facing the problem of weak demand. Tesla's pressure is also increasing in the face of the intense competition among global car companies. The United States and China are the two most important markets for Tesla. The current competition in the electric vehicle market in these two countries is already intense.

In order to cope with the intense competition in the Chinese market, Tesla has accumulated nearly RMB 100,000 in price cuts since 2019. In April, affected by the price war between Xiaomi's SU7 and Chinese car companies, Tesla once again lowered the price of Model 3 and Y, and launched a preferential policy of 0% interest and 0 down payment for vehicle financing.

However, the price reduction strategy is undoubtedly a double-edged sword. Frequent price reductions have brought significant pressure on Tesla's gross profit margin. Tesla's gross profit margin has fallen from 29.1% in 2022Q1 to 18% in 2024Q2.

The performance of new models is also not satisfactory. Is the demand for the Cybertruck lower than expected? Since its launch, the supply and demand of Cybertruck has been closely followed by Tesla investors and consumers. Its CEO Musk has invested a lot of resources in its development and plans to produce 0.2 million Cybertrucks per year.

But according to the latest report from the US media, Tesla has made a major adjustment to its Cybertruck ordering strategy and suspended the ordering of the cheapest rear-wheel drive (RWD) version. The price of this version was originally about $61,000, with a range of 250 miles. However, according to the latest information on the Tesla website, the cheapest Cybertruck currently on sale is the all-wheel-drive (AWD) version, priced at $99,990, with a range of 318 miles. Industry analysts pointed out that this adjustment means that the inventory backlog of the more expensive Cybertruck has reduced its demand.

To make matters worse, safety concerns are still a sword hanging over Tesla's head. Recently, Tesla recalled over 1.68 million cars in China due to safety issues. The week before that, Tesla had recalled more than 1.8 million cars in the United States. These negative safety-related news also caused Tesla to continue to experience downward pressure on its stock price.

In addition, Musk's bet on the progress of autonomous driving seems to be facing some challenges. The planned release date of the market-anticipated Robotaxi has been postponed from August 8 to October 10. With Waymo, Zoox, Apollo, Uber, Lyft, BYD, and other companies all laying out autonomous driving taxis, Tesla has already felt the pressure of intense competition. Waymo's autonomous taxi service has already provided services to the public and has recently expanded its Robotaxi business coverage in the United States.

Stopping its factory expansion plans, is Tesla's global expansion pace stopping?

Elon Musk once had ambitious plans for global expansion. As early as the shareholders meeting in 2018, Tesla CEO Elon Musk revealed plans to build 10-12 super factories around the world. In 2020, Musk even announced plans to build one super factory in every US state to promote the growth of electric vehicle production capacity.

At present, Tesla has established four vehicle factories in the United States, China, and Germany. However, recently there have been reports that Tesla has shelved plans for all new factories.

"Tesla is currently only discussing charging station construction and has canceled factory construction plans, not only in Thailand but also worldwide. Malaysia and Indonesia have both withdrawn, leaving only China, the United States and Germany (the existing factory location)." according to sources.

Recently, according to an anonymous official source quoted by the Thai National Daily, Tesla has cancelled plans to build factories in Malaysia, Thailand and Indonesia. Southeast Asia has long been viewed as one of Tesla's important target markets for global expansion due to its huge market potential and relatively low manufacturing costs, and these regions are also very welcoming of Tesla's "entry" into the super factory, providing great support in terms of policy and resources. At present, Tesla has not given a specific reason for the decision to stop building factories in Southeast Asia, but it is widely believed to be closely related to Tesla's global strategic adjustment.

On the other hand, progress at the Mexico factory is also not going well. Tesla announced the construction project of this "super factory" in March 2023, and planned to start producing cars from 2026, and received a lot of assistance from the Mexican government. However, Musk announced at the end of that year that the project would be delayed due to high interest rates. In July, Musk announced again that the construction of Tesla's assembly plant in Mexico had been suspended and would not be resumed until after the US presidential election in November, depending on the situation after the election.

Musk explained that Republican presidential candidate Trump threatened to impose high tariffs on cars produced in Mexico, so if this idea became a reality, investing heavily in Mexico would be meaningless for Tesla.

In addition, the expansion of Tesla's German factory has also encountered problems. Andreas Thierig, the manager of Tesla's Berlin factory, said, "If the market does not show a clear signal that it needs expanding production, we will not spend billions of dollars to expand the factory." Thierig pointed out that another factor Tesla must consider in expanding its Berlin factory is electric vehicle sales. He believes in the prospects of the Berlin factory and said, "We firmly believe that the market will rebound again, it's just a matter of time and speed."

Market commentators believe that the growth rate of global electric vehicle sales is slowing, and investing too much in production capacity means greater pressure, so suspending factory construction may have become Tesla's only option.

Tesla's stock price is sluggish, and analysts are debating whether to be bullish or bearish!

According to the Futubull app, 43% of analysts currently give Tesla a buy rating, 32% give it a hold rating, and nearly a quarter of analysts give it a sell rating.

Specifically, Goldman Sachs is most optimistic about Tesla, giving it a bullish target price of $310 and listing it as its top auto stock.

Adam Jonas, an analyst at Morgan Stanley, said that Tesla has made progress in controlling expectations in the automotive business and that the emerging drivers of company value are performing strongly. Jonas emphasizes Tesla's potential monopoly position in the zero-emission vehicle (ZEV) credit market and its growing recurring service revenue. He also pointed out that Tesla is actively transferring resources, technology, talent and capital from the automotive manufacturing field to other fields.

After the financial report was released, Truist raised Tesla's target stock price from $162 to $215 and maintained a hold rating.

The bank expects weak car sales but also raises its expectations for energy production/storage and Optimus. Truist analysts say that although Tesla has no "clear catalysts" before Robotaxi Day on October 10, the company's new models, including the Roadster sports car and other more economical models, could be another catalyst in the future.

On the other hand, many big banks are bearish on Tesla. Goldman Sachs lowered its target price from $248 to $230 and maintained a neutral rating on Tesla.

The analyst told investors in a research report that Tesla's basic automotive gross margin was lower than expected and lower than widely expected, and the company faces resistance from pricing/incentives and costs. The company continues to see Tesla as a leader in autonomous driving technology, but expects it to take two to three years to achieve conditionally unsupervised large-scale self-driving capability.

Bernstein also maintains a poor rating for Tesla with a target price of $120.

The institution believes that the sales revenue of autos has dropped by 7% year-on-year, while the company's total revenue has increased by 2%, mainly due to the strong performance of energy storage and very high regulatory credit. Bernstein notes that management's tone was relatively low-key on the conference call and Tesla did not reiterate its previous view that it would increase auto unit sales this year. In addition, Bernstein is puzzled as to why Tesla needs a separate robot taxi product and believes that Tesla is not necessarily in the lead in terms of autonomy.

Mooers,

Do you think Tesla's stock price will reach a turning point?

How will Tesla develop in the future?

Let's discuss in the comments section!