TSLA - Tesla: The Ripple Effect - A New Chapter In Leadership Dynamics

2024-01-26 03:19:15 ET

Summary

• Tesla lost the energy storage market lead to Sungrow and faces tough battery competition from CATL and BYD. BYD's Q4 2024 EV sales lead also impacts Tesla's valuation.
• The CyberTruck faces practical range challenges in towing and hauling, while Tesla's affordable Model 2 raises concerns about its manufacturing impact and market position.
• Tesla released FSD Version 12, showing potential in autonomous driving, but still appears to be operating at a Level 2 (L2) capability.
• The EU's investigation into Chinese EV firms might slow down competitors like BYD in Europe, potentially benefiting Tesla.
• If Tesla loses its EV lead, its valuation could drop 45% to $360 billion. Leading in EVs, energy, and autonomy could boost it by 81% to $1.2 trillion.

Tesla's Q4 Earnings Report: Stock Decline and Sales Slowdown

Tesla's (TSLA) latest earnings came out yesterday, January 24th, for the 4th quarter of last year. The news wasn't great - their stock dropped about 6% after the report came out.

The main issue seems to be that both their auto sales and energy business slowed down compared to the previous quarter. Tesla said they expect car sales to keep decreasing in 2024 too. The reason is they're shifting attention to ramping up production of their next-gen vehicles at the new Gigafactory in Texas. So it looks like Tesla has some challenging times ahead as they transition to their future lineup of products. Furthermore, as we shall show below, BYD surpassed Tesla in Q4 2024 in terms of EV unit sales. This has a negative knock-on effect on Tesla's valuation of its EV and energy businesses.

Investment Thesis

Back in November, we downgraded Tesla to a Hold rating because some key things worried us:

First, Sungrow surpassed Tesla in global energy storage market share last quarter. That was a surprise we didn't expect. Second, Tesla already faces stiff competition from leaders like CATL and BYD in batteries. That puts their cost position at risk....

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