Tesla Inc (TSLA) is making strategic changes in response to lower demand for electric vehicles and a projected slowdown in delivery growth rates for 2024. The company’s recent fourth-quarter earnings report fell short of Wall Street expectations, with misses on revenue and profit attributed to lower average sales prices for vehicles.
In an effort to boost revenue, Tesla has announced price increases for its popular Model Y SUV in the U.S. and certain Eurozone countries. The company’s CEO, Elon Musk, is reportedly considering slowing production in China due to competition from domestic EV producers like BYD and Nio Inc, as well as a global slowdown in EV sales.
Analysts at Oppenheimer believe that Tesla is shifting its focus towards maximizing value per vehicle rather than pursuing unit growth. They suggest that the company is positioning itself to increase revenue from software updates and artificial intelligence technologies. Tesla’s release of Full Self-Driving 12.3 is expected to accelerate training data collection and trigger incremental revenue recognition in the first quarter of 2024.
Despite a 32% decline in Tesla’s stock price in 2024, the Global X Autonomous & Electric Vehicles ETF (DRIV) has remained flat. Oppenheimer has lowered its delivery, revenue, and profit estimates for Tesla in 2024 but maintains a Perform market rating for the company.
In conclusion, analysts see Tesla as a potential transformational technology company with the ability to deliver outsized returns. The company’s execution on Model 3 and Model Y volumes, along with cost reductions in battery technology, will be critical in achieving sustainable profitability. As Tesla navigates these changes in strategy, investors and industry watchers will be closely monitoring its performance in the coming months.
