tesla (TSLA) – Get a free report Shares fell to their lowest levels since May on October 30, falling nearly 5% to less than $200 per share. The drop follows a series of losses since Tesla reported disappointing quarterly earnings results on October 18.
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Tesla faces a growing list of concerns
There is no doubt that the electric vehicle market represents a huge market opportunity for Tesla. According to Cox Automotive Kelley Blue Book, electric vehicle sales increased nearly 50% in the third quarter, a much faster rate than total vehicle sales. As a result, electric vehicles account for about 8% of all vehicles sold in the United States, up from 6% a year ago.
The strength of electric vehicle sales has not gone unnoticed by the automotive industry, as most manufacturers are launching new electric vehicle models. The increasing availability of electric vehicles is a good thing for consumers. However, more models mean Tesla faces more competition than ever.
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Arguably, you’re already seeing how competition is affecting your business. In the third quarter, sales of Tesla’s high-end Models S and X fell from a year ago, while Mercedes-Benz (MBGAF) – Get a free report saw its sales of electric vehicles increase. Overall, Tesla’s electric vehicle market share fell to 50% in the third quarter, down from 60% last year.
Competition won’t be easier after contract agreements between striking United Auto Workers and General Motors (G.M.) – Get a free reportford motor company (F) – Get a free reportand Stellantis (STLA) – Get a free report. The auto industry strike had been an obstacle to its electric vehicle efforts.
The increasing risk associated with growing competition from electric vehicles is one of the reasons Tesla shares fell on Monday. Panasonic Battery Supplier (PCRFY) – Get a free report reported a loss for the first time in three quarters, citing declining demand for batteries used in the Model S and Model
The supplier’s admission adds to a growing list of concerns about Tesla this year, including concerns that the long-awaited Cybertruck will be a drag on profits for longer than expected, the Justice Department investigation into mileage claims of Tesla’s electric vehicles could lead to sanctions. and higher interest rates could sap demand, leading to profit-damaging price cuts.
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The potential obstacles are weighing on the optimism of Wall Street analysts. The consensus full-year earnings per share forecast for 2024 has fallen to $3.75 from $4.17 over the past 90 days.
Sales research firm Bernstein issued a report on Oct. 30 saying Tesla’s margin and vehicle sales could disappoint next year.
“To drive growth of 500,000 units this year, Tesla had to cut prices by approximately 16%, pressuring overall operating margins by 750 basis points,” Bernstein’s Toni Sacconaghi, Jr. wrote. “It’s still unclear whether Tesla can further reduce prices enough to boost enough elasticity of demand without potentially becoming negative.”
If Tesla can’t boost sales with price cuts, it could see reduced revenue and profits, a double-edged sword that is likely to make some investors reconsider how much of a valuation premium they are willing to pay to own shares.
