Wall Street Isn’t So Sure Tesla Can Avoid Its First Annual Sales Decline in Over a Decade
As Donald Trump returns to the White House, investors are eagerly anticipating how his presidency will impact various industries. One company that has seen its stock surge significantly is Tesla Inc., which added more than $733 billion in market capitalization from Election Day through mid-December. However, despite this optimistic outlook, Wall Street analysts believe that Tesla may face a challenging year ahead, with some predicting that the company might experience its first annual sales decline in over a decade.
The EV Slowdown
The electric vehicle (EV) market has been experiencing a slowdown globally, which is affecting many manufacturers. Even as China’s BYD Co. continues to rise up the sales charts, it increasingly relies on its plug-in hybrid lineup. Volkswagen AG, Mercedes-Benz Group AG, and Volvo Car AB have scaled back their EV objectives for the coming years at some point in 2024. In the U.S., Ford Motor Co.’s plug-in vehicle business is bracing for a $5 billion annual loss.
Musk’s Outlook
Despite this challenging backdrop, Tesla CEO Elon Musk has remained optimistic about the company’s future prospects. When Tesla last reported quarterly earnings in October, Musk said that his best guess was that the company could increase sales by 20-30% next year. This outlook is based on the launch of more affordable models in the first half of next year, which have yet to be identified.
Chris McNally’s Analysis
Analyst Chris McNally at Evercore ISI wrote a report to clients on Monday, stating that his best guess is that Tesla will offer new variants of the Model 3 and Y that are $4,000-$5,000 cheaper through an improved electrical architecture and "de-contenting," a reference to using lower-cost parts or removing certain components or features. Tesla has already gained a head start on its affordability drive by closing the year with a flood of deals, ranging from cut-rate financing to years of free charging and cheaper leases.
Garrett Nelson’s Warning
However, analyst Garrett Nelson at CFRA Research disagrees with Musk’s optimistic forecast. In his report dated December 2, Nelson wrote that "we see headwinds facing EV sales from the possible combination of a stronger dollar, higher domestic oil production from easing regulations, and lower oil prices." According to Nelson, Tesla’s vehicle sales growth will likely be flattish in 2024, with volumes growing only 10-15% in 2025 or half as strong as its guidance.
Conclusion
As the world awaits the impact of Trump’s presidency on various industries, one thing is certain: Tesla faces a challenging year ahead. Despite Musk’s optimism, analysts believe that the company may experience its first annual sales decline in over a decade. Whether Tesla manages to eke out any growth or not in 2024 will be closely watched by investors and market experts.
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