{"id":3765,"date":"2023-10-20T18:27:18","date_gmt":"2023-10-20T18:27:18","guid":{"rendered":"https:\/\/infundpros.com\/news\/tesla-no-longer-the-king-of-evs-nasdaqtsla\/"},"modified":"2023-10-20T18:27:19","modified_gmt":"2023-10-20T18:27:19","slug":"tesla-no-longer-the-king-of-evs-nasdaqtsla","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=3765","title":{"rendered":"Tesla: No Longer The King Of EVs (NASDAQ:TSLA)"},"content":{"rendered":"
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Tesla, Inc.<\/strong> (NASDAQ:TSLA<\/span>) shares got slammed after the market digested the company’s Q3 2023 earnings call on October 18th, 2023. TSLA shares were doing okay in the aftermarket until CEO Elon Musk started talking off-topic about everything from the economy to weight loss.<\/span><\/p>\n

Despite the pullback, TSLA shares have greatly outperformed the Nasdaq (QQQ) and S&P 500 (SPY) YTD.<\/p>\n

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Data by YCharts<\/figcaption><\/figure>\n<\/p>\n

I always listen to Elon Musk’s remarks on Tesla’s performance to gain key insight into the entire EV industry and the overall global economy.<\/p>\n

I listened to the entire Tesla Q3 2023 earnings call and thought it was by far the worst call I’ve ever heard from the company. Former Tesla CFO Zachary Kirkhorn’s presence was greatly missed and I had trouble understanding the new Tesla CFO Vaibhav Taneja due to his thick accent.<\/p>\n

Elon Musk acted out of his character and seemed overly concerned with the global economy, interest rates, inflation, etc. I don’t think TSLA stock is a bad investment, but it makes you wonder if the downside risk is much greater in the short run than I thought.<\/p>\n

Q3 2023 Update<\/h2>\n

Tesla’s Q3 2023 numbers weren’t that bad, and I believe most of the negativity surrounded Elon Musk’s remarks instead of the underlying business.<\/p>\n

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Tesla Q3 2023 Company Highlights (tesla.com)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Tesla’s total revenue reached $23.3 billion (Up 9% YoY) with the majority of revenue coming from the EV segment ($19.6 billion).<\/p>\n

The company generated $1.8 billion in net income (Down 44% YoY) while EPS shrank to 53 cents per share.<\/p>\n

Free cash flow decreased to $848 million (Down 74% YoY) and the company finished Q3 2023 with $26.1 billion in cash on its balance sheet. Tesla’s Bitcoin (BTC-USD) holdings remained steady at $184 million worth of BTC.<\/p>\n

The company lowered its average cost of goods sold per EV to $37,500 in an effort to remain the market leader after several quarters of declining market share (more on that later).<\/p>\n

As for deliveries, Tesla is still on pace to hit 1.8 million in 2023. Q3 2023 deliveries were down due to updates at Tesla’s factory.<\/p>\n

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TSLA Q3 2023 deliveries (tesla.com)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Tesla Solar suffered from rising interest rates just like the EV business, but Tesla Energy Storage actually outperformed the rest of the company’s revenue producers.<\/p>\n

Tesla Energy storage increased 90% YoY to 4.0 GWh while Tesla Solar declined to 49 MW during the quarter.<\/p>\n

Lastly, the Supercharger network continues to grow at a pace reaching 5,595 Supercharging stations (Up 31% YoY).<\/p>\n

Much of the selloff was caused by the company’s failing operating margins, shrinking net income, and rising operating expenses.<\/p>\n

Shrinking Operating Margins is a Major Concern<\/h2>\n

Elon Musk once bragged that Tesla’s operating margins were the best in the auto industry, but that may change if the company doesn’t stop lowering the cost of its EVs so aggressively.<\/p>\n

Operating margins crashed to 7.6% in Q3 2023. This is putting a lot of pressure on Tesla’s bottom line as the company tries to slash prices to stir up demand.<\/p>\n

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Tesla Q3 2023 Operating Margins (tesla.com)<\/p>\n<\/figcaption><\/figure>\n<\/p>\n

Tesla has cut the price of its EVs several times in 2023 to stir up lagging sales but I believe there is a deeper problem here.<\/p>\n

In a tough economy where cash is king, there are too many EVs for sale and not enough buyers.<\/p>\n

A poll by the Energy Policy Institute at the University of Chicago and the Associated Press-NORC Center for Public Affairs Research found out that nearly half of Americans have no plans to purchase an EV in the future.<\/p>\n

Many Americans consider EVs “too expensive and out of reach,” according to car buying platform Autolist.<\/p>\n

Other issues are finding places to charge and loyalty to ICE vehicles even though EVs are more eco-friendly.<\/p>\n

CNBC posted an interesting video discussing the growing problem of EV oversupply that explains the problem in depth.<\/p>\n

Tesla’s U.S. Market Share is Falling<\/h2>\n

Tesla’s U.S. EV market share fell to 50% in Q3 2023 (down from 64% in Q1 2023) as more legacy automakers and EV companies produced EVs, which added a lot of competitors to the mix.<\/p>\n

Tesla is currently fighting a price war to maintain market share by lowering prices and sacrificing operating margins.<\/p>\n

There is an avalanche of EVs on the market or soon to hit the market, including:<\/p>\n