ii view: Tesla production slowed by factory upgrades

Third-quarter production update

• Total production of 430,488 vehicles, down from 479,700 in the previous quarter
• Deliveries of 435,059 vehicles, down from 466,140 in the previous quarter

ii round-up:

Car maker Tesla Inc (NASDAQ:TSLA) has detailed lower-than-expected quarterly production as it carried out planned factory shutdowns to upgrade operations. 

Third-quarter production to the end of September declined to 430,488 vehicles, down from the prior quarter’s 479,700 units and below Wall Street hopes for around 460,000. Tesla nonetheless maintained its full-year volume forecast of 1.8 million vehicles, a potential increase from 1.3 million in 2022.

Shares in the Nasdaq listed company were little changed following the update having about doubled year-to-date coming into this latest news. Shares for strike impacted General Motors Co (NYSE:GM) are down close to 5% in 2023 and European giant Volkswagen AG (XETRA:VOW) has fallen by just over 15%. The Nasdaq Composite itself is up by more than a quarter year-to-date, although down 5% over the last month. 

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Tesla deliveries during the quarter, the nearest number Tesla offers to sales, fell to 435,059 vehicles, down from 466,140 in the prior quarter and below analyst estimates of 456,000. 

Tesla factory plant upgrades have come as the automaker hopes to begin production of its new Cybertruck later this year. Ford's (NYSE:F) F-Series pick-up trucks remain big sellers in the USA. 

Production for the Elon Musk headed company now stretches across California and Texas in the USA, along with operations in both Germany and China. It also plans to build a new factory near Monterrey in Mexico as well as eventually starting production in India.

Broker Morgan Stanley reiterated its ‘overweight’ stance on the shares post the update, flagging the company as a ‘top pick’ and highlighting an estimated fair value target price of $400 per share. 

Third-quarter results are scheduled for 18 October. 

ii view:

Started in 2003, Tesla today makes both electric vehicles and energy generation and storage systems. With a stock market value of over $750 billion, it competes against rivals such as Mercedes and Ford each with stock market valuations at under $100 billion. High profile head Elon Musk previously added to his interests with the acquisition of social media company Twitter, now called X, a platform he believes can assist with marketing for Tesla.  

For investors, growing competition from competitors such as Ford, Bayerische Motoren Werke AG (XETRA:BMW) and Volkswagen cannot be ignored, with Tesla reducing its own selling prices in 2023. The economic backdrop is tough, with interest rates possibly going even higher. Costs generally for business remain 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 competitors, suggesting the shares are not obviously cheap.

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More favourably, factory numbers have grown during recent years, fuelling its ability to produce and sell vehicles. The geographical spread of factories including its relatively new European German plant 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.  

On balance, and despite heightened competition, long-term fans of this innovative EV-maker are likely to stay onboard for the ride. 

Positives: 

• Climate change concerns are growing globally
• Launching its own pick-up truck

Negatives:

• Rising competition from other manufacturers
• Elevated costs

The average rating of stock market analysts:

Strong hold