Bulls and bears are watching: Where is the limit of Tesla's "price war" with only two models?

Dependence on Tesla and Tesla's boost in sales, where is the end of the "price war"? Will it be at the delivery of the electric pickup truck Tesla?

In an article, Wall Street News points out that Tesla's single-quarter deliveries reached a new high in the second quarter, but inventory continues to increase, with Tesla's production exceeding deliveries for the fifth consecutive quarter.

In a recent report, Bernstein analyst Toni Sacconaghi wrote that they believe Tesla needs to continue to lower prices and increase promotions to stimulate demand:

"We believe that Tesla needs to further reduce prices and increase promotional activities this year or next year, undoubtedly putting further pressure on profit margins."

However, lowering prices and promotions may not be enough for Tesla's overall sales. Gary Black, a well-known Tesla bull and co-founder and managing partner of Future Fund, mentioned Tesla's importance to Tesla's future again on Twitter on July 4th.

Black predicts that with the boost from Tesla, Tesla's sales in 2024 will increase significantly by 53%, which will further stimulate Tesla's stock price. Tesla's stock price has already risen by over 161% to $282.48 this year.

Inventory continues to increase, will Tesla continue to lower prices?

In the second quarter, Tesla delivered over 466,100 vehicles to global customers, an increase of 83% compared to the same period last year, exceeding analysts' expectations by about 24,000 vehicles. The production volume was 479,700 vehicles, exceeding deliveries by 13,600 vehicles. In the past year, Tesla's cumulative production exceeded deliveries by about 74,300 vehicles.

At a time when you can't have your cake and eat it too, Tesla has clearly chosen sales growth over profit improvement.

Tesla CEO Elon Musk said during the earnings conference call after the release of the financial report that in the short term, scale is more important to Tesla than profit.

Now, the market's attention is turning to the impact of the "price war" on Tesla's second-quarter and full-year profit margins. Many Wall Street analysts believe that Tesla's automotive gross margin will inevitably fall below 20% by the end of this year. A Deutsche Bank analyst wrote in a report, "We still believe that there is a risk of further price reductions for Tesla in the remaining time of this year and in 2024. "

In the face of record-breaking deliveries, the biggest contributors are still Tesla and Tesla. Not only has Tesla dominated the US market, but it is also the best-selling model in the European market and the best-selling SUV in the Chinese market.

According to Bloomberg's analysis, Tesla now needs to consider how to squeeze out more sales growth from the two models that account for 97% of its sales.

However, Tesla and Tesla were released three and six years ago respectively, and the market is now eagerly awaiting the release of another "bread and butter" model from Tesla, which is likely to be the highly anticipated Tesla.

Will the "price war" extend to pickup trucks?

Gary Black mentioned the importance of the electric pickup truck that Tesla is expected to launch at the end of the third quarter of this year on Twitter.

Black believes that since pickup trucks account for 20% of the US automotive market, Tesla will expand the potential market range (TAM) of Tesla:

Those who short Tesla really don't understand how important Tesla's overall business growth will be in 2024. Tesla's TAM will increase significantly due to the launch of Tesla.

Black predicts that with the boost from Tesla, Tesla's sales in 2024 will increase by 53%.

The surprising sales of Tesla models in 2021 caused Tesla's stock price to soar by 743% in 2020 (while the Nasdaq rose by 50%).

Similarly, the halo effect of Tesla's sales will accelerate Tesla's overall sales growth to over 50% in 2024.

The release of Tesla is crucial for Tesla. The latest official comment from Tesla on the timetable is that deliveries are planned for "around the end of the third quarter." Tesla has postponed its release several times, making it the most anticipated model of the year for Tesla fans, who believe it will be a pivotal moment.

Wall Street News previously mentioned that a short essay on "Tesla" once boosted Tesla's stock price last month. According to Electrek, Tesla plans to produce 375,000 Tesla vehicles per year, far exceeding Wall Street's expectations. Analysts previously estimated production to be less than 100,000 vehicles in 2024 and around 240,000 vehicles by 2027.

Recently, Tesla CEO Musk also provided a production forecast for Tesla at the Tesla annual shareholders meeting. He believes that approximately 250,000 vehicles can be produced annually, but he later added that it could be between 250,000 and 500,000 units.

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Can the new Model 3 and Tesla stimulate sales?

Musk has repeatedly emphasized that Tesla's prices will not be low. Initially, Musk stated that the starting price of this pickup truck would be below $40,000. However, by 2021, this "enticing" price has been removed from the Tesla website.

Musk told shareholders last year that the specifications and pricing of the CyberTruck have changed since its release in 2019. Now Tesla simply states, "As the delivery date approaches, the final price list will be provided to you."

Therefore, before being able to mass-produce the new car at a lower cost, Tesla still needs to bet on Tesla and Tesla.

At the end of last year, there were reports that Tesla is designing a new Tesla, codenamed "Highland," which is expected to be launched in the second half of 2023. The report also stated that the new Tesla will undergo comprehensive adjustments in terms of appearance, interior, configuration, and power system.

Subsequently, a Tesla prototype with camouflage was found undergoing testing in California. In April of this year, the first uncamouflaged photo of the new Tesla was leaked, showing changes in headlights, bumpers, rearview mirrors, and interior.

In March of this year, Reuters reported, citing three informed sources, that the new Tesla model, codenamed Project Juniper, will be officially launched in the third quarter of 2024 and is expected to be available for sale as early as the fourth quarter of the same year. It is reported that the new car is also expected to be equipped with the same LCD instrument panel as the new Tesla for the first time, and will undergo minor adjustments in terms of body size, adopting a 2+3+2 seven-seat layout design.

Although Tesla has done everything possible to expand its sales, with traditional American automakers developing electric vehicles one after another, it is expected that Tesla's market share will further shrink in the future.

According to a report by Bank of America analysts, by 2026, Tesla's market share in the U.S. electric vehicle market will decline to 18%. This is a significant decrease compared to Tesla's 62% market share in the U.S. electric vehicle market in 2022, not to mention the peak market share of 78% in 2018.