Tesla(NASDAQ: TSLA) finds itself in the throes of intense competition and weakening demand, a confluence that is striking at the core of its sales profitability. Consequently, Tesla shares languish 43% below their zenith in 2021.
Amid these fierce headwinds, the electric vehicle (EV) titan slashed prices by an average of 25.1% last year, in a bid to counteract these unfavorable trends. Yet, in the first quarter of 2024 – as evidenced by data from Cox Automotive – the industry resorted to further price reductions, piling pressure on Tesla’s bottom line. Indeed, during the second quarter of 2024 alone, Tesla witnessed a wincing 46% year-on-year decline in its earnings per share.
Regrettably, these price cuts failed to meaningfully elevate sales, with Tesla recording deliveries of a record 1.8 million EVs in 2023. However, a growth rate of 38% pointed to a deceleration trend for a second consecutive year. Matters exacerbated in the initial two quarters of 2024 as deliveries shrank compared to the same period a year prior.
Revving up Growth: Tesla’s Strategic Blueprint
In response to these challenges, China-based BYD unveiled an EV priced below $10,000, potentially heralding a foray into the European market – a traditional stronghold for Tesla. To counter, Tesla is gearing up to launch a budget-friendly EV model next year, slated to carry a price tag of just $25,000. While not directly matching the BYD offering on price, Tesla aims to leverage its premium brand image to allure cost-conscious consumers.
Yet, Tesla’s ambit extends far beyond EVs. With groundbreaking strides in autonomous self-driving software, a futuristic humanoid robot, and a burgeoning presence in solar energy and battery storage, Tesla has diversified its revenue streams. While it might be a stretch before these segments outshine the EV business in revenue terms, some analysts are already predicting a meteoric rise in Tesla’s stock value.
Investor Dilemma: The Tesla Conundrum
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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends BYD Company and Tesla. The Motley Fool has a disclosure policy.