The prices being paid to Tesla

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sydboy007
2023-01-17

The prices being paid to Tesla for current deliveries were not at the most recent high prices

Elon has admitted the prices were obscenely high for the model Y, but it was the only way to keep the order backlog from being multiple years.

As the price of Tesla's vehicles falls their TAM increases exponentially.

These prices reductions are mainly due to falling costs. The margin impact is likely minimal.

Likely Tesla competitors will be driven out of business, which will free up supply to Tesla, helping them increase production in an unconstrained manner.

It's funny that the commentary is only Tesla has a demand issue, when you look at every auto manufacturer has declining sales except BYD, which now faces model 3 pricing at levels destroying demand for it's most successful electric vehicles.

Tesla's Price Cuts Signal Major Demand Problems

SummaryThis week's price cut could lead to a per car margin reduction of over 50% in the US.Tesla's

Tesla's Price Cuts Signal Major Demand Problems

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·2023-01-17
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{"i18n":{"language":"en_US"},"data":{"magic":2,"id":9956811332,"tweetId":"9956811332","gmtCreate":1673959492627,"gmtModify":1676538908585,"author":{"id":4133775735376252,"idStr":"4133775735376252","authorId":4133775735376252,"authorIdStr":"4133775735376252","name":"sydboy007","avatar":"https://community-static.tradeup.com/news/default-avatar.jpg","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":1,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":6,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"html":"<html><head></head><body>The prices being paid to Tesla for current deliveries were not at the most recent high prices\n \nElon has admitted the prices were obscenely high for the model Y, but it was the only way to keep the order backlog from being multiple years.\n \nAs the price of Tesla's vehicles falls their TAM increases exponentially.\nThese prices reductions are mainly due to falling costs. The margin impact is likely minimal.&nbsp; \nLikely Tesla competitors will be driven out of business, which will free up supply to Tesla, helping them increase production in an unconstrained manner. \nIt's funny that the commentary is only Tesla has a demand issue, when you look at every auto manufacturer has declining sales except BYD, which now faces model 3 pricing at levels destroying demand for it's most successful electric vehicles.</body></html>","htmlText":"<html><head></head><body>The prices being paid to Tesla for current deliveries were not at the most recent high prices\n \nElon has admitted the prices were obscenely high for the model Y, but it was the only way to keep the order backlog from being multiple years.\n \nAs the price of Tesla's vehicles falls their TAM increases exponentially.\nThese prices reductions are mainly due to falling costs. The margin impact is likely minimal.&nbsp; \nLikely Tesla competitors will be driven out of business, which will free up supply to Tesla, helping them increase production in an unconstrained manner. \nIt's funny that the commentary is only Tesla has a demand issue, when you look at every auto manufacturer has declining sales except BYD, which now faces model 3 pricing at levels destroying demand for it's most successful electric vehicles.</body></html>","text":"The prices being paid to Tesla for current deliveries were not at the most recent high prices Elon has admitted the prices were obscenely high for the model Y, but it was the only way to keep the order backlog from being multiple years. As the price of Tesla's vehicles falls their TAM increases exponentially. These prices reductions are mainly due to falling costs. The margin impact is likely minimal. Likely Tesla competitors will be driven out of business, which will free up supply to Tesla, helping them increase production in an unconstrained manner. It's funny that the commentary is only Tesla has a demand issue, when you look at every auto manufacturer has declining sales except BYD, which now faces model 3 pricing at levels destroying demand for it's most successful electric vehicles.","highlighted":2,"essential":1,"paper":1,"likeSize":24,"commentSize":12,"repostSize":0,"favoriteSize":0,"link":"https://ttm.financial/post/9956811332","repostId":2303753886,"repostType":2,"repost":{"id":"2303753886","pubTimestamp":1673942550,"share":"https://www.laohu8.com/m/news/2303753886?lang=&edition=full","pubTime":"2023-01-17 16:02","market":"us","language":"en","title":"Tesla's Price Cuts Signal Major Demand Problems","url":"https://stock-news.laohu8.com/highlight/detail?id=2303753886","media":"Seeking Alpha","summary":"SummaryThis week's price cut could lead to a per car margin reduction of over 50% in the US.Tesla's ","content":"<html><head></head><body><h2>Summary</h2><ul><li>This week&#39;s price cut could lead to a per car margin reduction of over 50% in the US.</li><li>Tesla&#39;s backlog has likely been declining since the summer, and used Tesla values had dropped ~15% before these latest cuts.</li><li>I see little evidence that declining costs will save margins; battery costs rose in 2022 for the first time in a decade.</li><li>Reducing US prices below the $55,000 ceiling in the Inflation Reduction Act doesn&#39;t explain away the price cuts in the EU.</li><li>I see little chance that Tesla&#39;s 2023 earnings exceed 2022&#39;s earnings.</li></ul><img src=\"https://static.tigerbbs.com/c520175a47f7c851f6eda11fb071b3e5\" tg-width=\"1080\" tg-height=\"810\" referrerpolicy=\"no-referrer\"/>Xiaolu ChuTesla&#39;s (NASDAQ:TSLA) finish to 2022 was abysmal, with the company shedding $600 billion in market value in 3 months. Many Tesla bulls believe the primary reason for the sell-off is Elon Musk&#39;s acquisition of Twitter (and associated selling of nearly $8 billionin Tesla stock to fund it) coupled with his behavior on the site post-acquisition. While this certainly wasn&#39;t helpful, I do not believe this is the main reason for the precipitous drop.<img src=\"https://static.tigerbbs.com/4ccc838ea48117e63535d8234c0c731a\" tg-width=\"635\" tg-height=\"433\" referrerpolicy=\"no-referrer\"/>Data by YChartsThe primary reason is far more basic; Tesla has simply saturated its key markets. If the Q4 delivery miss wasn&#39;t enough of a signal, this week&#39;s price cuts should be.I believe Tesla had an ugly choice to make: it could either badly miss delivery forecasts in 2023, or it could cut price drastically and hope to bridge some of the gap withvolume. I believe it is ultimately the wrong choice, and Tesla has chosen the path that&#39;s more likely to help the stock price in the near term, rather than maintain the brand&#39;s value in the long term.<h2>Tesla Car Values and Backlog</h2>Tesla enthusiast Troy Teslike noted a precipitous decline in backlog since the middle of the summer. For most of the last 2.5 years, demand for Tesla&#39;s cars certainly exceeded supply, but this seemed to have reversed in the past 6 months.<img src=\"https://static.tigerbbs.com/ba4b85746feadc0bf81f60f67cab6bb1\" tg-width=\"564\" tg-height=\"769\" referrerpolicy=\"no-referrer\"/>Tesla Backlog (Troy Teslike (Twitter))In the same timeframe, Tesla used car values, which were extremely strong for most of the pandemic, began to rapidly decline.<img src=\"https://static.tigerbbs.com/860dc3358ecacee3ce324a673f432cea\" tg-width=\"640\" tg-height=\"610\" referrerpolicy=\"no-referrer\"/>Tesla Used Car Values (CarGurus as of 1-14-23)Tesla car values had already dropped significantly in the past 90 days, which in my opinion was a far bigger reason for the stock dropping than Elon&#39;s Twitter sideshow. The latest move will knock another $10,000+ off residual values on top of what&#39;s already happened in the past 90 days.<h2>Price Cut Impact on Gross Margins</h2>Tesla supporters believe it is a luxury brand. But luxury brands generally don&#39;t cut prices in the face of slack demand. In general, they don&#39;t cut prices at all!Guggenheim&#39;s analysis on the impact of the price cut is pretty grim, especially for the Model Y.<img src=\"https://static.tigerbbs.com/d9559c453e9557a0e14fc12d96aafcd7\" tg-width=\"549\" tg-height=\"680\" referrerpolicy=\"no-referrer\"/>Price Cut Margin Impact (Guggenheim estimates)Unless volumes increase rapidly from 2022 levels, the narrative of Tesla being &#34;cheap&#34; on an earnings per share basis is going to be challenged as 2023 progresses.<h2>Tesla Cost of Goods</h2>One theory I&#39;ve heard is that Tesla&#39;s supply chain costs have dropped significantly, so they&#39;re better able to pass along the savings to customers. I very much doubt this is true.2022 was the first year in the last decade where battery costs increased, due to sharp increases in the price of lithium, cobalt, nickel, and other raw materials. The cost of labor has also risen significantly in the past few years.<img src=\"https://static.tigerbbs.com/d38972cae70cb1da6790ee192e488ba5\" tg-width=\"640\" tg-height=\"376\" referrerpolicy=\"no-referrer\"/>EV Industry Battery cost estimates (BloombergNEF)Impacts from any increase in battery costs won&#39;t be felt immediately, as Tesla usually has fixed term contracts in place, but when these contracts are rolled over and renegotiated, the price is likely up and not down.<h2>EV Credits and the Inflation Reduction Act</h2>The price cuts in the US were strategic in that they moved most Tesla models below the $55,000 ceiling for the newly available $7500 credit in the Inflation Reduction Act. By moving under this ceiling, the end price for a Model Y LR drops from ~$68,000 to $47,130, a massive reduction which will certainly increase volume. How much volume still remains to be seen. Unlike the previous $7500 credit, the new EV credit has income exclusions, so single filers that make more than $150,000 are ineligible. This likely includes large portions of the young, technologically savvy crowd that Tesla is popular with.Had the US price been reduced in isolation, I could listen to the argument that this move was done to maximize the tax credit and grow already strong demand more rapidly. But this is not what has happened, because, at the same time, the US price has been reduced, Tesla has reduced pricing across most of the EU as well, following the recent price cuts in China.<img src=\"https://static.tigerbbs.com/3a00abe83ad68c6fb4207077193a5e9b\" tg-width=\"664\" tg-height=\"581\" referrerpolicy=\"no-referrer\"/>Tesla EU Prices (Tesla.com)It appears that the exhaustion of the backlog and increased competition are pressuring the European market as well.<h2>Conclusion</h2>I have seen several bulls frame this latest move as Tesla going &#34;on the offense&#34; to capture further market share and put legacy auto out of business. It&#39;s an interesting take, but I believe it is ultimately just fantasy.Tesla did a fantastic job executing over the past 3 years, expanding capacity and navigating the supply chain crisis well. They were still able to produce Model 3 and Model Y&#39;s while other manufacturers had to cut production. Raising production in an undersupplied market allowed Tesla to raise prices, and they received an additional tailwind from high gasoline prices earlier this year. From a production standpoint, they did well and the stock price responded.But at the same time, the majority of the new promised products have not come to fruition, and Tesla still derives the overwhelming majority of its revenue from 2 aging car models that have not had a significant refresh since inception. Gas prices have fallen significantly and other manufacturers are producing again.Even with lower prices, I think it will be a challenge for Tesla to match 2022 volumes, let alone sell enough incremental units to raise earnings. Those who are buying Tesla today because it&#39;s &#34;cheap&#34; at 30x earnings might see it get much cheaper if earnings fall in 2023.This article is written by Fishtown Capital for reference only. Please note the risks.Also Read: <a href=\"https://ttm.financial/NW/1149025848\" target=\"_blank\">Teslas Are Finally Getting Cheaper. It&#39;s a Sign Elon Musk&#39;s Back Is Against the Wall</a></body></html>","source":"seekingalpha_fund","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Tesla's Price Cuts Signal Major Demand Problems</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; 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}\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTesla's Price Cuts Signal Major Demand Problems\n</h2>\n\n<h4 class=\"meta\">\n\n\n2023-01-17 16:02 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4570177-teslas-price-cuts-signal-major-demand-problems>Seeking Alpha</a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\nSummaryThis week's price cut could lead to a per car margin reduction of over 50% in the US.Tesla's backlog has likely been declining since the summer, and used Tesla values had dropped ~15% before ...\n\n<a href=\"https://seekingalpha.com/article/4570177-teslas-price-cuts-signal-major-demand-problems\">Web Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{"LU1720051108.HKD":"ALLIANZ GLOBAL ARTIFICIAL INTELLIGENCE \"AT\" (HKD) ACC","LU0943347566.SGD":"安联收益及增长平衡基金AM H2-SGD","LU2357305700.SGD":"Allianz Global Artificial Intelligence ET H2-SGD","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU1839511570.USD":"WELLS FARGO GLOBAL FACTOR ENHANCED EQUITY \"I\" (USD) ACC","LU1861559042.SGD":"日兴方舟颠覆性创新基金B SGD","LU0823411888.USD":"法巴消费创新基金 Cap","LU0053666078.USD":"摩根大通基金-美国股票A（离岸）美元","BK4585":"ETF&股票定投概念","BK4534":"瑞士信贷持仓","BK4581":"高盛持仓","LU0082616367.USD":"摩根大通美国科技A（dist）","LU1551013342.USD":"Allianz Income and Growth Cl AMg2 DIS USD","BK4533":"AQR资本管理(全球第二大对冲基金)","LU0056508442.USD":"贝莱德世界科技基金A2","BK4555":"新能源车","LU0719512351.SGD":"JPMorgan Funds - US Technology A (acc) SGD","IE00B1XK9C88.USD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A\" (USD) ACC","LU2249611893.SGD":"BNP PARIBAS ENERGY TRANSITION \"CRH\" (SGD) ACC","LU0820561909.HKD":"ALLIANZ INCOME AND GROWTH \"AM\" (HKD) INC","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","LU0234572021.USD":"高盛美国核心股票组合Acc","BK4574":"无人驾驶","BK4527":"明星科技股","TSLA":"特斯拉","LU2063271972.USD":"富兰克林创新领域基金","BK4550":"红杉资本持仓","LU0823414478.USD":"法巴经典能源转换基金","LU0097036916.USD":"贝莱德美国增长A2 USD","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","LU0689472784.USD":"安联收益及增长基金Cl AM AT Acc","BK4551":"寇图资本持仓","LU2087621335.USD":"ALLSPRING GLOBAL FACTOR ENHANCED EQUITY \"A\" (USD) ACC","LU1852331112.SGD":"Blackrock World Technology Fund A2 SGD-H","LU1720051017.SGD":"Allianz Global Artificial Intelligence AT Acc H2-SGD","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","LU1861215975.USD":"贝莱德新一代科技基金 A2","LU0316494557.USD":"FRANKLIN GLOBAL FUNDAMENTAL STRATEGIES \"A\" ACC","LU1548497426.USD":"安联环球人工智能AT Acc","LU1861558580.USD":"日兴方舟颠覆性创新基金B","LU1861220033.SGD":"Blackrock Next Generation Technology A2 SGD-H","LU0820561818.USD":"安联收益及增长平衡基金Cl AM DIS","BK4511":"特斯拉概念","BK4099":"汽车制造商","BK4548":"巴美列捷福持仓","LU1551013425.SGD":"Allianz Income and Growth Cl AMg2 DIS H2-SGD","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC"},"source_url":"https://seekingalpha.com/article/4570177-teslas-price-cuts-signal-major-demand-problems","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"2303753886","content_text":"SummaryThis week's price cut could lead to a per car margin reduction of over 50% in the US.Tesla's backlog has likely been declining since the summer, and used Tesla values had dropped ~15% before these latest cuts.I see little evidence that declining costs will save margins; battery costs rose in 2022 for the first time in a decade.Reducing US prices below the $55,000 ceiling in the Inflation Reduction Act doesn't explain away the price cuts in the EU.I see little chance that Tesla's 2023 earnings exceed 2022's earnings.Xiaolu ChuTesla's (NASDAQ:TSLA) finish to 2022 was abysmal, with the company shedding $600 billion in market value in 3 months. Many Tesla bulls believe the primary reason for the sell-off is Elon Musk's acquisition of Twitter (and associated selling of nearly $8 billionin Tesla stock to fund it) coupled with his behavior on the site post-acquisition. While this certainly wasn't helpful, I do not believe this is the main reason for the precipitous drop.Data by YChartsThe primary reason is far more basic; Tesla has simply saturated its key markets. If the Q4 delivery miss wasn't enough of a signal, this week's price cuts should be.I believe Tesla had an ugly choice to make: it could either badly miss delivery forecasts in 2023, or it could cut price drastically and hope to bridge some of the gap withvolume. I believe it is ultimately the wrong choice, and Tesla has chosen the path that's more likely to help the stock price in the near term, rather than maintain the brand's value in the long term.Tesla Car Values and BacklogTesla enthusiast Troy Teslike noted a precipitous decline in backlog since the middle of the summer. For most of the last 2.5 years, demand for Tesla's cars certainly exceeded supply, but this seemed to have reversed in the past 6 months.Tesla Backlog (Troy Teslike (Twitter))In the same timeframe, Tesla used car values, which were extremely strong for most of the pandemic, began to rapidly decline.Tesla Used Car Values (CarGurus as of 1-14-23)Tesla car values had already dropped significantly in the past 90 days, which in my opinion was a far bigger reason for the stock dropping than Elon's Twitter sideshow. The latest move will knock another $10,000+ off residual values on top of what's already happened in the past 90 days.Price Cut Impact on Gross MarginsTesla supporters believe it is a luxury brand. But luxury brands generally don't cut prices in the face of slack demand. In general, they don't cut prices at all!Guggenheim's analysis on the impact of the price cut is pretty grim, especially for the Model Y.Price Cut Margin Impact (Guggenheim estimates)Unless volumes increase rapidly from 2022 levels, the narrative of Tesla being \"cheap\" on an earnings per share basis is going to be challenged as 2023 progresses.Tesla Cost of GoodsOne theory I've heard is that Tesla's supply chain costs have dropped significantly, so they're better able to pass along the savings to customers. I very much doubt this is true.2022 was the first year in the last decade where battery costs increased, due to sharp increases in the price of lithium, cobalt, nickel, and other raw materials. The cost of labor has also risen significantly in the past few years.EV Industry Battery cost estimates (BloombergNEF)Impacts from any increase in battery costs won't be felt immediately, as Tesla usually has fixed term contracts in place, but when these contracts are rolled over and renegotiated, the price is likely up and not down.EV Credits and the Inflation Reduction ActThe price cuts in the US were strategic in that they moved most Tesla models below the $55,000 ceiling for the newly available $7500 credit in the Inflation Reduction Act. By moving under this ceiling, the end price for a Model Y LR drops from ~$68,000 to $47,130, a massive reduction which will certainly increase volume. How much volume still remains to be seen. Unlike the previous $7500 credit, the new EV credit has income exclusions, so single filers that make more than $150,000 are ineligible. This likely includes large portions of the young, technologically savvy crowd that Tesla is popular with.Had the US price been reduced in isolation, I could listen to the argument that this move was done to maximize the tax credit and grow already strong demand more rapidly. But this is not what has happened, because, at the same time, the US price has been reduced, Tesla has reduced pricing across most of the EU as well, following the recent price cuts in China.Tesla EU Prices (Tesla.com)It appears that the exhaustion of the backlog and increased competition are pressuring the European market as well.ConclusionI have seen several bulls frame this latest move as Tesla going \"on the offense\" to capture further market share and put legacy auto out of business. It's an interesting take, but I believe it is ultimately just fantasy.Tesla did a fantastic job executing over the past 3 years, expanding capacity and navigating the supply chain crisis well. They were still able to produce Model 3 and Model Y's while other manufacturers had to cut production. Raising production in an undersupplied market allowed Tesla to raise prices, and they received an additional tailwind from high gasoline prices earlier this year. From a production standpoint, they did well and the stock price responded.But at the same time, the majority of the new promised products have not come to fruition, and Tesla still derives the overwhelming majority of its revenue from 2 aging car models that have not had a significant refresh since inception. Gas prices have fallen significantly and other manufacturers are producing again.Even with lower prices, I think it will be a challenge for Tesla to match 2022 volumes, let alone sell enough incremental units to raise earnings. Those who are buying Tesla today because it's \"cheap\" at 30x earnings might see it get much cheaper if earnings fall in 2023.This article is written by Fishtown Capital for reference only. Please note the risks.Also Read: Teslas Are Finally Getting Cheaper. It's a Sign Elon Musk's Back Is Against the 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