Is Tesla Ignoring Fundamentals?

Tesla founder and CEO Elon Musk for the second time in a year has not impressed investors with a major product announcement, further fracturing the BEV maker’s investment outlook.

On Friday, the day after Musk unveiled his autonomous Cybercab as well as a multi-passenger Robovan, more than $60 billion was wiped off of Tesla’s valuation in a selloff. Shares had been up over 70% since Musk began talking up artificial intelligence (AI) as a profit center last April.

Bernstein analyst Toni Sacconaghi said in a note following the event that Tesla’s valuation is disconnected from current fundamentals of the BEV mobility market, writing that the robotaxi reveal was “short on immediate deliverables or incremental revenue drivers.”

Tesla’s Cybercab will go into production before 2027, Musk says. The concept, a 2-door with butterfly doors and no steering wheel or accelerator pedal, not only seems like an odd design and package for a robotaxi, but Tesla still has much to do toward fixing its Full Self-Driving (FSD) system, the company’s advanced driver-assistance system that aims to enable fully autonomous driving capabilities in Tesla vehicles. Tesla frequently updates its FSD software through over-the-air updates, and the feature is still considered in beta, with Tesla drivers required to supervise the system and be ready to take control if necessary.

What analysts were looking for was some meaningful update on a less expensive model that would be priced starting at $25,000. EV sales have slowed down to flat levels compared with 2023 despite a raft of new models in the market. There is consensus that models priced around $25,000-$30,000 are what’s needed to pull more buyers off the sidelines.

Musk’s Cybertruck reveal almost a year ago has also left investors looking for more fundamental improvement at Tesla and updates on high-volume models. The radically designed Cybertruck, with a catalogue of quality and production problems, has sold approximately 27,000 units through August.

As of October 2024, 13 analysts have a "buy" rating on Tesla stock out of a total of 38 analysts who have provided ratings. The overall consensus is "hold," with 17 analysts recommending holding the stock and eight suggesting selling.

According to S&P Global, the shift to BEVs is accelerating, with 2026 seen as a critical year for growth based on the availability of more BEV models and the milestones to meet federal targets. By 2030, over 25% of new passenger cars sold are expected to be electric, says S&P Global.

Major automakers, including Tesla, are projected to produce over 70% of global BEVs by 2030, up from just 10% in 2022. The company is expected to lose some market share but still be a dominant player in the transition away from ICE vehicles.

The availability of sub-$30,000 BEVs is viewed as crucial for all automakers to speed adoption of all-electric vehicles. Ford, General Motors, Stellantis and Volkswagen are all fast-tracking lower-cost, lower-priced EVs to combat the growth of cheaper Chinese-made BEVs. Investors want more details on Tesla’s plans for that segment.

The market for robotaxis is still a lot of guesswork.

(https://www.wardsauto.com/autonomous-adas/robotaxi-dreams-hitting-wall-of-reluctance-and-delays)

One of the wildcards investors have difficulty assessing is the short- and long-term impact on Tesla sales of Musk’s increasing support for divisive right-wing values and political candidates via his Z social media platform and specifically his partnership with controversial presidential candidate Donald Trump, who vows to make Musk a kind of government cost-cutting czar should he win the election this November.

No CEO has been as vocal and involved in a political campaign as Musk. The worry, traditionally, among CEOs, especially those managing consumer-brand businesses, is that their personal politics will impact the company’s business. Musk, depending on Tesla’s share price, is among the two or three wealthiest people in the world, and has discarded that convention.