The Zhitong Finance App learned that Tesla (TSLA.US), the global electric vehicle leader, is expected to release weak first-quarter car delivery data next week. Delivery volume used to be one of the biggest positive catalysts for Tesla's stock price. In 2024, it may be difficult to boost Tesla's stock price, and it may even drag down Tesla's stock price. For Tesla, the sales boost brought about by price cuts continues to weaken, and in the face of a sharp slowdown in demand in the electric vehicle market, Tesla is facing intense competitive pressure from Chinese automakers. After years of rapid and continuous strong sales and sales growth, Tesla has become the most valuable electric vehicle manufacturer in the world, but under multiple pressures such as high interest rates, the global electric vehicle leader is preparing for a sharp slowdown in sales growth in 2024.

The expectation that the Federal Reserve will maintain high interest rates for a long time has greatly weakened global consumers' interest in buying various Tesla electric vehicle models. After all, most buyers rely on installment interest rates. Meanwhile, Tesla's rivals in China, the world's largest electric vehicle market, are launching cheap models one after another, while Tesla has been slow to update old models.

Adam Jonas (Adam Jonas), a well-known analyst at Wall Street firm Morgan Stanley (Morgan Stanley), said in a report to customers earlier this month: “Tesla may have seen that consumers are very tired of price cuts and may be testing profit levels that the company may not accept.” “Given the age of Tesla's product line, this situation probably won't improve significantly anytime soon.”

Statistics show that pessimistic demand expectations have caused Tesla's stock price to plummet by nearly 28% so far this year, making it one of the worst performing companies in the S&P 500 index (S&P 500).

According to Visible Alpha's survey and consultation data of 17 analysts, Tesla is expected to deliver approximately 458,500 vehicles in the first quarter ending March 31. This figure is higher than 422,875 cars in the same period last year, but it is down more than 5% from the previous three months.

Is Tesla, the “price butcher of North America”, facing its darkest hour?

Since the end of 2022, Tesla, under the leadership of CEO Musk, has drastically reduced the prices of Tesla's various electric vehicle models at the expense of profit margins. This move did help increase sales in the early stages, but it also made many customers frustrated when they saw a sharp drop in car value.

However, in the latter stages of the price war, the sales boosting effect brought about by Tesla's price cuts disappeared. As the global electric vehicle price war intensified, Tesla faced fierce competitive pressure from Chinese automakers, and rivals in China, the world's largest electric vehicle market, launched cheap models to compete against Tesla, causing Tesla's recent sales in China to continue to suffer, giving up the title of supremacy of electric vehicle sales in China.

Musk has said that price cuts are needed to keep factories running efficiently, and blamed the suppression of demand on high consumer spending on energy in winter and high global borrowing costs. At the beginning of this year, Tesla continued to cut prices in the US, China, and Germany while increasing various discounts and incentives to drive demand for electric vehicles. For example, Tesla is currently offering up to $7,680 off some new Model Y's in the US.

In a report released this week, HSBC said: “Tesla already has a dubious honor of being the fastest depreciating car in the US.” “We can see how cheaper prices apply to consumables, but we're not convinced that it works for durable-grade consumer goods because the residue is part of the cost equation.”

In January of this year, Tesla warned that this year's sales growth rate would “decline significantly” due to the company's focus on the development and large-scale production of next-generation electric vehicles.

More importantly, a protracted price war made China, one of Tesla's most reliant markets, a difficult market for the automaker. In the fourth quarter, Tesla relinquished the Chinese market and even the title of the world's best-selling electric vehicle manufacturer to BYD, which also cut prices drastically in China.

Statistics show that in the first two months of this year, Tesla delivered 131,812 electric vehicles manufactured in China, a year-on-year decrease of about 6.2%.

In the US, Tesla's Model 3 compact sedan is one of the models not eligible for the $7,500 federal tax credit this year due to government restrictions on purchasing electric vehicle batteries and other materials from China.

Notably, American buyers have been choosing cheaper hybrid cars since the second half of 2023. These cars are more fuel-efficient than pure gasoline-powered cars and have a longer driving range than pure battery-powered electric vehicles. As a result, Wall Street analysts expect demand for electric vehicles to continue to decline in 2024.

Furthermore, during this quarter, Tesla had to deal with the serious problem of the shutdown of German factories, but some analysts expect that the German factory shutdown will have a relatively small impact on Tesla's delivery volume.

From January 29 to February 11, the Tesla factory near Berlin suspended most production lines because the Red Sea shipping crisis impeded the supply of important parts needed by Tesla cars. Since then, in March of this year, after the arson incident on March 5, the factory faced a shutdown for about a week. At the time, German far-left activists claimed that the arson caused a fire to a power tower near the factory.

Wall Street has huge differences over Tesla's stock price outlook! Will FSD be the strongest catalyst for Tesla's stock price?

Currently, Wall Street analysts' overall views on Tesla are rapidly deteriorating, mainly due to signs that electric vehicle sales are slowing down under pressure from high interest rates, and incentives from governments around the world are drying up. Wall Street analysts' average forecast for Tesla's stock price over the next 12 months is $197.77, but the lowest is $85 and the highest is $320. The difference between the two is huge.

In March, Wall Street bank Wells Fargo downgraded Tesla's rating to the lowest level on the grounds that the company could cut prices further, which would affect its profits. Wells Fargo analyst Colin Langan downgraded Tesla's rating from “hold and wait” to “reduce holdings” and drastically cut its price target from $200 to $125. He said that Tesla's overvaluation compared to other “Big Seven US stocks” “may be a risk.”

Analyst Langan said in the research report: “We are seeing a downside risk in sales because the impact of price cuts is weakening. We are seeing headwinds from disappointing deliveries and more price cuts, which could lead to negative revisions to earnings per share.” He added: “Our estimates of earnings per share for 2024 and 2025 are 32% and 52% lower than consensus estimates, respectively.”

Bernstein analysts lowered Tesla's target share price from $150 to $120 per share. This means the stock will drop significantly from Wednesday's closing price of $179.83. Bernstein pointed out that in fact, Tesla's valuation has been very high in the past few years, but this is because Tesla's growth rate in the past was much higher, and today's situation is very different from before.

Bernstein lowered Tesla's production forecast for this year to 1.98 million units, lower than the market's general forecast of 2.06 million units. At the same time, it is expected that Tesla will maintain a weak sales growth trend until the end of 2025.

In the US, car builders have recently urgently suspended their electric vehicle expansion plans. At the end of last year, Ford Motor Company (F.US) delayed investing $12 billion in its electric vehicle business due to weak demand. General Motors (GM.US) cancelled a $5 billion agreement with Honda Motor Company (HMC.US) to produce affordable electric vehicles and abandoned long-standing production forecasts for 2024. Electric vehicle startup Rivian Automotive (RIVN.US) announced plans to lay off 10% of employees in February and released a very weak production forecast for 2024.

However, bullish Tesla analysts, represented by Adam Jonas (Adam Jonas) from Morgan Stanley, generally said that Tesla's fully automated driving (FSD) V12 test drive service is also an important logic for them to be optimistic about Tesla's stock.

Starting March 16, 2024, Tesla will launch the latest FSD Beta V12.3 advanced driver assistance system to FSD subscribers and subscribers across the US. This push is the first large-scale push after V12.1 and V12.2 were tested by employees and a small number of users. This push means that the commercial implementation of the end-to-end smart driving model represented by FSD V12 is within easy reach. Afterwards, on March 26, Musk sent an email to all Tesla employees requesting North American employees to install and activate FSD V12.3.1 before delivering the vehicle to provide new customers with an FSD test drive experience.

As a result, the Tesla FSD V12 is expected to begin accelerated implementation in North America, and full launch is just around the corner, while the new “end-to-end” architecture is expected to significantly improve FSD's intelligent driving capabilities and user experience, and Tesla Smart Driving is expected to usher in its own ChatGPT moment.

Morgan Stanley analyst Jonas maintained Tesla's target share price of $320 after the previous adjustment, and the rating is still “increased.” The analyst, who is bullish on Tesla, said that Tesla's Dojo supercomputing system is expected to promote the full popularization of Tesla FSD and autonomous taxis, and may increase the market value by up to 500 billion US dollars, just as AWS means to Amazon. Wall Street investment institutions with similar views also include Wedbush, which is bullish on Tesla's stock price to $315.

Bradley Gerstner, CEO of Altimeter Capital, recently said that Tesla's fully automated driving (FSD) beta V12 is also one of the reasons he is so optimistic about Tesla stock. “When I test-drove it, it was a bit like the ChatGPT moment,” he notes. “(Tesla) completely abandoned their previous deterministic model and switched to an imitation learning model. This was the first time it really felt like a person was driving a car, and Waymo was still a deterministic model.”

Gerstner also positively reviewed the $199 monthly subscription price for the fully automated driving feature and compared it to the price when Apple (AAPL.US) released the Apple Music streaming service. “It's something no one else can easily replicate,” he said. “(Elon Musk) has put 5 million robotic cars on the road to gather data to train this imitation model; this makes it significantly better, and almost impossible to replicate by all traditional OEMs (original equipment manufacturers).”

According to Gene Munster, managing partner of Deep Water Asset Management, the FSD function is significant to Tesla's stock price, and FSD has the potential to significantly increase revenue. Munster predicts that although Tesla currently charges customers $199 per month, if the price of the FSD package is reduced to $100 per month and the software is licensed to 25% of the new cars and light trucks on the market, it could increase Tesla's revenue by about $4 billion. Munster anticipates that by the fifth year, the company's annual revenue may increase by about $20 billion.