Tesla (TSLA) shares are rising after the company beat expectations for second-quarter vehicle deliveries. Barclays senior auto analyst Dan Levy joins Morning Brief to offer insights on Tesla’s performance and whether concerns about slowing EV demand are nearing an end.
“Certainly, competition in China will be tougher, but Tesla still has a place in China. Their share of total EV sales is still stable in the high single digits, so they are actually stable. But it’s certainly competitive,” Levy told Yahoo Finance.
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This post Nicholas Jacobino
Video Transcript
This morning, we’re looking at Tesla stock. The electric vehicle giant delivered 440,000 vehicles in the second quarter, beating the expected 439,000, due to concerns that the demand slowdown may be coming to an end. I’d like to offer my opinion on that here.
Joining me today is Dan Levy, senior equity research analyst at Barclays. Dan, thank you so much for joining us today.
Is this a sign that price cuts are working for Tesla?
Hello Madison, thank you so much for having me.
Well, I think today’s result was definitely an unexpected positive.
415,000 units were previewed.
What’s interesting about these results is that we did see the impact of price cuts during the quarter.
If we look at the US, there was a 1% fundraising in May which I think played a key role.
There was also an additional discount.
By the end of the month, there may have been other factors driving the move.
Well, there’s still a risk of further price declines ahead and more questions about the fundamentals. We’re still facing a winter of EV demand. So, this is a good thing.
But I think the fundamental macro backdrop remains the same.
How far do you think prices can be reduced?
Well, Tesla is probably taking a more cautious approach to price cuts after cutting prices very aggressively last year and failing to stimulate demand as hoped.
Perhaps they have changed their strategy to one that is not so blatant in lowering prices.
So, rather than direct price reductions, prices have been reduced through incentives such as special financing and sales of stock vehicles.
You see, there are levers that allow you to set your price however you want without making an across-the-board discount, which could do some damage to the residual value.
I want to talk about China because Chinese EV manufacturers in particular are experiencing continued success in that market.
Of course, how worried should Elon Musk be about that?
Listen, China is probably the most competitive region for Tesla.
That’s where Tesla faces its toughest competition — against competitors with products that are just as good as Tesla’s.
Some would argue that it’s even better from a software-defined perspective.
Tesla certainly does not have the same advantages in China as it does in the US and Europe, so competition there will definitely be tougher, but there is still a place for Tesla in China.
We still see BEVs maintaining a fairly stable share in the high single digit range as a percentage of total unit sales.
So, they are actually stable, but the competition is certainly fierce.
Now that we have a bit of a breakout, or at least a vague number, on how many Cybertrucks they are producing and delivering, let’s take a look at it.
And we know it’s still early days for Tesla in this regard.
But what do you think about the response to the Cybertruck and the number of deliveries? The Cybertruck is also reflected in other models such as the S and X.
But what does this tell us about what kind of run rates and growth we should expect in that part of the business?
The Cybertruck is still a fairly niche business.
The bulk of sales are still driven by the Model 3, which is what makes it a more mass-market option for Tesla.
Well, they are ramping up production of the Cybertruck, but supplies are still limited at this time.
I think we’ll know more later this year and into next year.
As supply constraints ease, we will be able to rent more quickly and we will know what the underlying demand is.
We think this is a fairly niche model.
We think it will be around 50,000 per year, which is a positive but still a very small portion of Tesla’s total.
And now, Dan Levy, senior equity research analyst at Barclays, great to have you here.
Thank you very much for your time.
Thank you so much, Brad Madison.
