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In response to stalling EV deliveries, Tesla plans to lay off about 10% of its staff worldwide. According to a memorandum sent by CEO Elon Musk to his employees, approximately 14,000 workers are expected to be affected. The aim of this move is to increase production efficiency and lower the costs. The Tesla boss also expressed that a restructuring of the company on 5-year basis is necessary to achieve future growth. Two important executives are also leaving the company by their own decision, namely the head of battery development Drew Baglino and the vice president of public policy Rohan Patel, which has investors worried. Analysts have mixed views on the news, with some seeing this as a positive change, while others question whether they will be sufficiently replaced based on their long history with the Tesla.
Tesla recently reported a steep 8.5% drop in Q1 sales compared to a year ago. While in the past the manufacturer has led the market with its vehicles like the Model 3 and Model Y, competitors are quickly taking its place. Other automakers continue to expand their offerings, such as Rivian, which is reporting significant sales growth with R1 pickup. Chinese manufacturer of smartphones and other consumer electronic equipment Xiaomi made its debut in the EV market this year and is already reporting sales 3 to 5 times ahead of expectations. Tesla's future depends on new mass-produced models but plans for a new vehicle with the working title "Redwood", which was to be priced below $30,000, have been scrapped, according to information from Reuters. The company is now reportedly focusing on its autonomous taxi project instead. Tesla has not been aided by price cuts nor indecisive statements from its boss Elon Musk. However, just like Tesla, other manufacturers, such as General Motors or Volkswagen, are also facing problems selling their electric cars.
These recent events have further contributed to negative investor sentiment towards Musk's automaker. Some global investment banks have already downgraded Tesla's stock from 'Buy' to 'Hold', such as Deutche Bank, with the 12-month price target for the stock being cut from $189 to $123. * The biggest concern comes from the fact that Tesla currently has no profit potential from selling cheaper models like the "Redwood" was meant to be, and they don't see that potential in the robotaxi project. Analysts further state that an equal, if not greater, number of resources will be required to develop the robotaxi, as development of a fully autonomous vehicle poses enormous technological, regulatory and operational challenges.
Morgan Stanley said in its report that for Tesla's stock to stabilize, its earnings need to be in line with market consensus. The cumulative annual sales growth rate is being revised as well from the original 50% to less than 20% by 2030. The current non-GAAP earnings per share estimate for 2024 is $1.12, which is significantly lower than the market consensus of $2.67. The analysts emphasize that their forecast is balanced and could move up or down. [1]With this strategy, they believe Tesla appears to be exiting the traditional EV market, although that doesn't mean it can't keep selling them. It just needs to do more. Morgan Stanley points out that this market is currently in recession mainly due to affordability, safety regulations, infrastructure challenges, reduced incentives or hybrid vehicles competition.
Source: Investing.com*
* Data relating to the past are not a guarantee of future returns.
[1] Forward-looking statements represent assumptions and current expectations that may not be accurate or are based on the current economic environment, which may change. These statements are not guarantees of future performance. Forward-looking statements inherently involve risk and uncertainty because they relate to future events and circumstances that cannot be predicted and actual developments and results may differ materially from those expressed or implied in any forward-looking statements.
Warning! This marketing material is not and must not be understood as investment advice. Data relating to the past are not a guarantee of future returns. Investing in foreign currency may affect returns due to fluctuations. All securities transactions can lead to both profits and losses. Forward-looking statements represent assumptions and current expectations that may not be accurate or are based on the current economic environment, which may change. These statements are not guarantees of future performance. InvestingFox is a trademark of CAPITAL MARKETS, o.c.p., a.s. regulated by the National Bank of Slovakia.
Sources:
https://finance.yahoo.com/news/xiaomi-says-sales-ev-3-093151817.html
https://www.caranddriver.com/news/a60428602/tesla-model-2-affordable-ev-canceled/
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