TSLA - Tesla: 2024 Is Not A BEV Year (Rating Downgrade)

2024-06-24 02:24:07 ET

Summary

• Tesla's aggregate deliveries forecast for 2024 and 2025 lowered due to declining sales in the US, China, and Europe, leading to a SELL rating.
• BEV sales in the US are falling due to tax credit changes and declining used Tesla prices.
• PHEV sales are rising faster than BEV sales in China, impacting Tesla's market share and financial results.

Investment thesis

We have covered the stock before and in this report, we present a detailed analysis of the electric vehicle market situation in three key markets for Tesla (TSLA): the United States, China, and Europe.

• In the U.S., in addition to the age-old reason of a lack of public charging stations, we're seeing a decline in the number of BEV models that are currently eligible for the tax credit program, which has been tightened since the beginning of 2024, as well as the relentless decline in used Tesla prices.
• In China, PHEV sales growth is confidently leading the way, raising the issue of switching to completely clean electric vehicles due to the outstanding characteristics of the new generation PHEV.
• In Europe, subsidies for EVs have been reduced in a number of countries, which has slowed their sales growth.

Therefore, based on the analysis provided in the report, we lower the forecast for Tesla's aggregate deliveries in 2024 from 2.2 million units (+24% yoy) to 1.6 million units (-10% yoy) and in 2025 from 2.8 million units (+26% yoy) to 2 million units (+24% yoy). The rating is SELL.

4Q 2023 report overview

Our previous article is accessible via this link .

In the previous report, we expected that the Redwood model would become a highly sought-after product due to its low cost (not only in the Tesla EV line, but also among internal combustion engine or ICE cars) and a practical crossover model, which will give the company an incentive to increase production of this model. Among other things, it is expected that after the launch of such a low-cost EV, Tesla may find itself in a cannibalization situation, as a result of which sales of the 3/Y models will suffer. We still maintain this view and in the current report we will further describe that in our view it is the Tesla Model 2 "Redwood" that will become the key driver of supply growth from 2025 ....

For further details see: