The US electric car manufacturer Tesla recently caused disappointment with its earnings report for the third quarter. However, investors don’t have to worry, say experts, because the Musk Group can still leave the competition behind.
• Tesla disappoints with figures and loses market share
• Experts give the all-clear: There are still bright spots at Tesla
• Tesla shares a buy now?
The US electric car manufacturer Tesla was unable to meet expectations in terms of both sales and profits in its third quarter figures. Tesla shares then temporarily fell by more than ten percent.
Tesla is facing competition
The Musk Group is increasingly feeling the effects of strong competition from Rivian, NIO, BYD but also from long-established automobile manufacturers such as General Motors, Ford & Co. Tesla’s share of the US electric vehicle market fell to around 50 percent in Q3, after it was 65 percent in full-year 2022, as Investopedia reports, citing Cox Automotive’s electric vehicle sales report.
In addition to increasing competition, a difficult market environment, characterized by high interest rates, high inflation, a weakening economy and geopolitical risks, is also a burden.
Circumstances are putting pressure on Tesla’s profitability
All of this has led Tesla to make drastic price cuts. The car manufacturer wanted to sell more vehicles and expand its market share again. Compared to the previous year, Tesla was able to record a 19.5 percent increase in vehicle sales in the third quarter of 2023. Nevertheless, the price cuts have of course affected sales growth. Costs are rising, which is why Tesla is making less profit per vehicle, which ultimately puts pressure on profitability. While Tesla earned $15,159 per vehicle sold in the third quarter of 2022, it was just $8,431 in Q3 of this year.
Bright spots
However, the financial magazine Nasdaq.com gives the all-clear because investors would have to take various other variables into account in order to get a comprehensive picture of Tesla’s situation. Tesla’s gross profit per vehicle in the third quarter only fell by four percent compared to the previous quarter.
In addition, Tesla is still far ahead of the competition in many respects. As a report from the data company Cloud Theory shows, none of the other electric car manufacturers “have emerged as strong competitors,” reports Business Insider. The competition has a lot of work to do to catch up with Tesla. In addition, it is unclear who will be able to withstand these challenges of the next decades. “The honest answer is that no one really knows,” the report states. “Tesla is obviously the dominant player in the market right now and is well positioned to maintain its leadership position,” Business Insider quoted Rick Wainschel, vice president of data science and analytics at Cloud Theory, from a press release. “The big question is which manufacturer will challenge Tesla’s dominance. So far, no one has proven to be a strong competitor.”
Is Tesla stock a buy now?
According to Nasdaq.com, Tesla shares are currently trading at one of the lowest valuation levels since the company became consistently profitable. The paper has taken a breather, which is why it offers an optimal entry opportunity. One share of the US electric car manufacturer currently costs $223.71 (as of November 13, 2023). Since the beginning of the year, the titles have increased in price by more than 81.61 percent.
Long-term investors should continue to keep in mind that inflation will return to normal and the Fed will cut interest rates again, Nasdaq.com further notes. In a better market environment, Tesla will probably not have to reduce its prices further. As soon as costs fall again and sales growth recovers, profitability should also increase significantly again.
Editorial team finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
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