ii view: more cheer for Tesla as deliveries whizz past forecasts

Shares in the Elon Musk headed electric vehicle company have risen by 113% so far in 2023. We assess prospects.

Second-quarter production update

• Deliveries of 466,140 vehicles, up from 422,875 in the previous quarter
• Total production of 479,700 vehicles, up from 440,808 in the previous quarter

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ii round-up:

Car maker Tesla Inc (NASDAQ:TSLA) detailed a significant ramp-up in demand for its all-electric vehicles (EVs) which beat Wall Street hopes.

Second-quarter deliveries, the nearest number Tesla offers to sales, rose 83% year-over-year to 466,140, beating analyst forecasts nearer to 446,000 and marking an increase from 422,875 in the first quarter. 

Shares for the Nasdaq listed company rose by around 1% in pre-market US trading, having more than doubled year-to-date coming into this latest news. Rival Ford Motor Co (NYSE:F) is up by almost 30% over that time, while European mammoth Volkswagen AG (XETRA:VOW) has gained less than 5%. The Nasdaq Composite itself is up by close to a third. 

Tesla production during the quarter increased to 479,700 from 2022’s second-quarter total of 258,580 vehicles, and up from the prior first quarter’s 440,808. 

In 2022, Tesla started production at new plants in both Germany and Texas, along with raising output at existing factories in California and Shanghai, China. It previously detailed plans to build a new factory near Monterrey in Mexico and possibly one in India eventually.

Tesla sales are now being helped by a recent US government decision to make its Model 3 and Y vehicles eligible for a $7,500 tax credit under President Biden’s Inflation Reduction Act.

The EV maker’s much-anticipated Cybertruck is expected to enter production in the latter half of 2023. Second-quarter results are scheduled for 19 July. 

ii view:

Started in 2003, Tesla today makes both electric vehicles and energy generation and storage systems. It previously flagged its hopes for vehicle deliveries over this current full year 2023 to come in at between 1.8 and 2 million, a potential increase of over 50% from 2022. With a stock market value of over $800 billion, it competes against rivals such as Ford and General Motors Co (NYSE:GM) each worth under $65 billion. High profile head Elon Musk previously added to his interests with the acquisition of social media company Twitter, a platform he believes can assist with marketing for Tesla.  

For investors, increasing all-electric and hybrid vehicle competition from rivals such as Ford and VW cannot be overlooked, and the economic backdrop remains highly challenging. Costs for businesses generally are now elevated, the full environmental impact of battery production remains open to debate, while Tesla’s estimated price to Net Asset Value (NAV) of over 15 times contrasts with estimates at under two times for many of its rivals, suggesting the shares are not obviously cheap.

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On the upside, growth in production is helping to drive sales. The geographical spread of production including a plant in Europe has reduced shipping costs, development of its vehicle software and network of supercharging stations continues, while sales for its energy generation and storage business also offer further potential.  

An analyst consensus estimate of fair value currently at $210 per share suggests the shares are up with events for now. However, the stock has a huge investor following and adoption of electric vehicles is predicted to accelerate as battery life and range improves. In the meantime, Tesla is likely to remain a volatile stock - one which fans will want to own for the long term, and others will be happy to keep trading.

Positives: 

• Increasing production
• Climate change concerns are growing globally

Negatives:

• Rising competition from other manufacturers
• Elevated costs

The average rating of stock market analysts:

Hold