Analysts say Tesla has a demand problem and it will be difficult to meet this year's delivery targets without lowering prices and increa...

Tesla unlikely to have 'great' year like Musk expects

Analysts say Tesla has a demand problem and it will be difficult to meet this year's delivery targets without lowering prices and increasing incentives.

On a conference call in October, Musk predicted that electric car maker Tesla would perform "excellent" in the final quarter of the year. But for now, that outlook is clouded by production cuts in China and falling car prices.

In the US, Tesla is offering unprecedented discounts to its customers. That's a $3,750 offer to get some cars now rather than waiting until next year.

"Tesla appears to be increasingly having a demand problem," Bernstein analyst Toni Sacconaghi said in a statement last week. He believes Tesla needs to cut prices further to boost demand in China and reduce fixed costs on U.S. models to gain stimulus under the country's inflation-cutting laws.

Earlier this week, Musk ceded the title of world's richest man to the owner of luxury goods group LVMH, largely due to a fall in Tesla's stock price. However, Tesla is still able to be the envy of other automakers. The electric automaker remains globally dominant, with small inventories at the end of September.

However, Elon Musk may have to make some compromises in order to meet his goal of increasing vehicle deliveries by an average of 50% per year. Tesla CEO admits he missed 2022 delivery target Facing rising battery costs, falling prices on some models could eat into Tesla's profit margins.

Musk also repeatedly referred to "headwinds" that Tesla can't control. In his third-quarter financial report, he said that due to the collapse of China's property market, the impact of the European energy crisis and the US Federal Reserve's (Fed) interest rate hike, the current demand performance is not good. capacity. He continued to share the same comments on Twitter last week.

Tesla's problems began in the final quarter of the year, when the company reported that production exceeded deliveries by more than 22,000 vehicles in the previous quarter. Shortly after, Tesla cut the prices of all products in China by 5-9%. In November, the U.S. automaker rolled out an insurance subsidy program, revived its marketing program and even advertised on local infomercials. This contradicts Musk's longstanding policy of shunning traditional marketing channels.

Tesla also planned last week to cut production at its Shanghai factory by about 20% from the previous month, Bloomberg reported. At the same time, they also increased incentives. The company plans to close factories in China later this month or early January and is working on shorter shifts for each worker, Bloomberg's sources said.

In April, Musk said Tesla would produce more than 1.5 million vehicles this year. As of the end of the third quarter, the company has delivered 929,910 vehicles, and more than 570,000 vehicles need to be assembled to complete the annual target.

"Tesla is going to have a hard time getting to 1.5 million this year. We assessed concerns about a recession, rising interest rates and buyers' reluctance to spend heavily," concluded Sam Fiorani, vice president of AutoForecast Solutions. prose.