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Tesla Delivers but Faces Headwinds

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  • Record High Deliveries
  • BYD Overtakes Tesla
  • Tesla’s Bumpy Road

Record High Deliveries

In 2023, Tesla achieved significant sales, exceeding the estimated 1.8 million vehicles, a notable accomplishment under Elon Musk’s leadership. This achievement can be attributed to strategic price cuts designed to stimulate demand in an increasingly competitive electric vehicle (EV) market.

Tesla’s sales showed a 38% increase in 2023 compared to the previous year, indicating a slight deceleration in its growth rate. The company is now navigating a more competitive environment characterized by measured expansion and reduced profit margins.

Despite reaching this impressive milestone, Tesla’s CEO had ambitiously hinted at a target of 2.0 million sales last year, a goal that remained unmet.

Nevertheless, over the past 16 years, Tesla has sold close to 5.5 million electric vehicles, a testament to the significant impact that the company had in the EV market.

A graph showing Tesla's sales over the years. Source: ir.tesla.com

During the latest quarter, the EV automaker smashed its previous record of 466k deliveries by handing over 485k EVs to its loyal customers.

Moreover, the company has finally begun delivering its long-awaited Cybertruck to its ecstatic customers.

A graph showing Tesla's deliveries by model.

Source: brandude87 & Tesla IR (Reddit)

BYD Overtakes Tesla

This month marked a milestone for the Chinese vehicle manufacturer BYD, which surpassed Tesla’s Q4 sales for the first time. BYD sold 526k battery-only electric vehicles, outperforming Tesla’s Q4 sales of 485k in 2023.

A graph comparing BYD and Tesla's sales.

Source: Bloomberg

On an annual basis, BYD recorded a growth rate of 70% Year-over-Year, selling nearly 1.6 million battery-powered vehicles compared to 1.81 million by its competitor Tesla.

This intense rivalry has caused Tesla to slash prices in China to boost the demand for its products.

Tesla revealed new pricing for its Model 3 sedan and Model Y SUV, with the Model 3 seeing a 5.9% cut to $34,600, while the Model Y got a 2.8% discount to $36,400.

Tesla’s Bumpy Road

Tesla (TSLA) intends to suspend operations at its primary European facility in Berlin for a fortnight due to a shortage of components. This move indicates the beginning of the global economic impact resulting from the recent assaults on vessels in the Red Sea.

Tesla announced that it will cease most of its production activities at its plant near Berlin from January 29 to February 11 due to a component shortage. The company plans to resume production on February 12.

To add to the challenges Tesla’s investors face, the company is set to increase the salaries of its entire US workforce. Consequently, Tesla’s profit margins are expected to suffer further due to rising operating expenses.

Also, Tesla has recalled 1.6 million cars in China due to technical issues with its driver assistance to fix autopilot issues, in a similar move to the one they did in the US last month. The recall in the United States occurred during an extensive investigation by the leading automotive safety authority into accidents involving driver-assist systems over several years.

Lastly, Hertz, a rental company, is offloading approximately 20k electric vehicles, including Teslas, from its U.S. fleet. This move comes roughly two years after the firm’s agreement with the automaker to provide its vehicles for rental, indicating a downturn in the demand for electric vehicles.

All the price cuts have also hit Tesla’s gross margins (GM) to boost the demand for its products.

Source: Company Data

Look at how, steadily, Tesla’s GM has been shrinking and even falling behind competitors Toyota and VW, halving from 34% to 16% in two years.

Are margins ready to bounce off in a big way, especially given that the most anticipated recession is yet to materialize in the US? And what will drive earnings growth for Tesla?

Those questions will probably be addressed in the next major company update on 24-Jan-2024 when Tesla releases its Q4’2023 earnings!

Investors can long Tesla using our 1x Tesla, 2x Tesla, 3x Tesla.

Alternatively, traders can short Tesla using our -1x Tesla, -2x Tesla, -3x Tesla.

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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Sandeep Rao

Research

Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

Marketing Lead

Julian joined Leverage Shares in 2018 as part of the company’s primary expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak

Head of Communications and Strategy

Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined Leverage Shares from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

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