NEW YORK: Elon Musk’s warning that high interest rates could sap electric-vehicle (EV) demand knocked shares of the sector on Thursday (Oct 19), with some analysts questioning if Tesla can maintain the runaway growth that has for years set it apart from other automakers.
The world’s most valuable automaker's stock closed down 9.3% at US$220.11, erasing more than US$70 billion (RM336.2 billion) in market value.
Rivals including Rivian Automotive, Lucid Group and Fisker ended down between 4% and 5%, while legacy automakers such as Ford closed nearly 2% lower.
The comments marked a change in tone from Tesla CEO Musk, who said last year that his company was “recession-resilient”.
The EV maker missed revenue estimates on Wednesday by the most in more than three years and Musk said it was impossible to maintain a 50% annual delivery growth rate.
“It didn’t have the same zip. We await Tesla’s earnings calls with a sense of excitement and suspense – and they usually deliver. Not Wednesday night,” Canaccord Genuity analysts said.
The company is expected to cut prices further in the current quarter to meet its annual deliveries goal of 1.8 million vehicles, even after its gross margin contracted to 17.9% between July and September from 25.1% a year earlier.
“We continue to believe that Tesla is a car company, and that the competitive nature of the auto industry will make it difficult for any player to have a sustained profitability advantage,” Bernstein analyst Toni Sacconaghi said.
Overall, 15 analysts cut their price targets on the stock, pushing the median view to US$260, according to LSEG data.
The stock has nearly doubled in 2023 on investor optimism that the company will fare better than rivals in an uncertain economy and see a long-term boost from its self-driving efforts.
The stock trades at about 59 times its 12-month forward earnings estimates, compared with 6.3 times for Ford and General Motors' 4.2.
“The current market valuation appears to rest on the specious assumption that the hundreds of EVs slated for launch by 2025 will all be flops. Tesla does not operate in a vacuum,” said Craig Irwin, senior research analyst at Roth Capital.
In another development, Japan’s Toyota Motor, the world’s largest automaker by sales, said on Thursday it had signed an agreement to adopt Tesla’s EV charging technology from 2025.
Ford Motor, General Motors and Nissan are among the other automakers that have adopted Tesla’s North American Charging Standard (NACS), taking the Musk-led company’s superchargers closer to becoming the industry standard at the expense of the rival Combined Charging System (CCS).
The Japanese automaker will incorporate the NACS ports into certain Toyota and Lexus battery-electric vehicles, including the new Toyota SUV that will be assembled at its manufacturing plant in Kentucky.
Existing owners of Toyota and Lexus vehicles equipped with CCS will be offered access to an adapter to enable NACS charging, also starting 2025.
Tesla’s NACS is widely available, with the US Department of Energy saying they make up about 60% of the fast chargers in the United States.
The rival CCS system is backed by automakers including Volkswagen, though the German company has held talks with Tesla about adopting the NACS.
Meanwhile, in Mexico City, Mexico's Nuevo Leon state said on Thursday that Tesla was still planning to build a factory and that the government would spend more than US$130 million on infrastructure to support construction, a day after Musk said he was hesitating on the project.
Tesla announced the planned factory in the northern Mexican state in March, without providing a timeline for construction.
Musk on Wednesday said he was still set on the site in the Santa Catarina municipality in northern Mexico, but that the timing was uncertain due to global economic factors, and construction likely would not begin until next year.
Mexico has touted the Tesla project, estimated to cost US$5 billion, as proof the “nearshoring” trend is taking off as companies seek to move production away from Asia and set up operations closer to the US.
After a fraught process for Tesla to confirm its Mexico plans, investors are closely watching the automaker's next steps in the country.
Santa Catarina's Mayor, Jesus Nava, said local officials were beginning to improve infrastructure in the area where Tesla is set to build the factory.
“At the state and municipal level, we’re moving ahead with studies for the infrastructure requested by Tesla, which will amount to more than 2.5 billion pesos ($136.46 million) provided by the state,” he said in a statement.
“We hope in the first half of 2024 to have the start of Tesla’s construction.”
Musk on Wednesday said the company was “laying the groundwork to begin construction” in Mexico but did not yet have more definite plans.
“The question is really just one of timing ... we think we’ll start the initial phases of construction next year,” Musk said, citing concerns over high interest rates affecting affordability for car buyers.
Nuevo Leon Governor Samuel Garcia, who on Wednesday during a visit to Shanghai announced nearly US$1 billion in expected investments from Chinese Tesla suppliers, could not be reached for comment.
His office said Musk and Nuevo Leon officials spoke by phone this week to discuss the project. – Reuters