After a new delivery record in the second quarter, investors are eagerly awaiting Tesla’s second-quarter figures.
• Tesla with delivery record in the second quarter
• Increasing nationalism and protectionism: Competition in China is gaining ground
• Investors eagerly await Q2 numbers – focus on margins
At the beginning of the month, the US electric car manufacturer Tesla was able to surprise positively with its delivery figures. Musk Group produced 479,700 cars and delivered 466,140 in the second quarter, beating analysts’ expectations and setting a delivery record for Tesla.
The quarterly figures for the past quarter are now imminent and investors are already eagerly awaiting to find out how the car manufacturer has recently developed.
Competition makes up ground
According to Seeking Alpha, the strong delivery figures were mainly due to the 93,680 units delivered to China in June. According to the China Passenger Car Association (CPCA), deliveries to China now account for more than half of the automaker’s global sales.
However, the problem for Tesla could be that competitors in China are increasingly gaining ground against the US carmaker. Above all, the Buffett holding BYD was able to increase its deliveries by more than 90 percent to 703,561 units and thus put more vehicles on the roads in the second quarter of 2023 than ever before. In addition, NIO delivered 10,707 vehicles in June 2023, 74 percent more than in the previous month. For the full quarter, the Tesla rival reported 23,520 vehicles sold. Xpeng was also able to increase deliveries in June. The company brought 8,620 electric cars – 15 percent more than in the previous month – onto the streets. In the second quarter of 2023, Xpeng was able to increase its deliveries by 27 percent compared to the first quarter to 23,205 copies. Meanwhile, Li Auto delivered 32,575 vehicles in June. In the entire second quarter, the electric car manufacturer had 86,533 units – an increase of 201.6 percent compared to the second quarter of 2022.
nationalism and protectionism
Another source of uncertainty, according to Seeking Alpha, is rising protectionism and nationalism due to deteriorating US-China relations. After a long reliance on foreign brands in China, the tide seems to be turning. In any case, the recent surge in China’s Tesla rivals could be a sign of increasing interest in domestic electric vehicles.
And so the question arises as to how China will deal with foreign competitors in its push into the electric car market in the future. For example, the country could reduce its subsidies for foreign brands while local companies build their own infrastructure. In addition, the Chinese brands could also conquer the European and US markets.
“Learning from new Chinese EV startups would be best for foreign brands if they want to survive in China or face the disruptive impact these brands are having in their home markets,” Seeking Alpha quoted Stephan Dyer of consulting firm AlixPartners, where man expects annual sales of Chinese cars in overseas markets to increase to 9 million vehicles (30 percent share) by 2030. Consolidation is also expected at AlixPartners: Due to a lack of sales, only 25 to 30 of the 167 NEV brands should be able to survive by 2030.
Look at quarterly figures – focus on margin
Market participants are now eagerly awaiting Tesla’s figures in the evening. In the first quarter, Tesla’s price cuts weighed on the company’s profits. Despite a jump in sales, the US electric car maker earned just 2.5 billion US dollars in the first quarter, 24 percent less than in the same period last year. Musk’s attempt to boost sales with deep discounts weighed on Tesla’s profitability. Tesla’s operating profit margin fell to 11.4 percent from 16.0 percent in the previous quarter, after it had even been 19.2 percent a year earlier.
As Goldman Sachs analyst Mark Delaney wrote after the delivery figures were presented, the focus should now be on the operating margin and the question of whether further price cuts are necessary. A further decline in margins would likely push the company into negative cash flow territory, Seeking Alpha reports, and so the company would have to decide in the coming quarters whether to halt price cuts or burn through its cash stash. The former seems to be the case, since Tesla recently signed a fairness agreement with 15 other EV manufacturers to end the price wars in China.
A look at Tesla’s sales should also be interesting for investors, because growth may have slowed down in the first half of the year as prices normalized. Inventory could also be an issue as Tesla has produced more vehicles than it has shipped for the fifth straight month, Jefferies analyst Philippe Houchois pointed out after the second-quarter delivery numbers were released. Already in the first quarter, according to Seeking Alpha, the increase in inventories had led to an increase in working capital, which had a negative impact on free cash flow. But according to Houchois, the gap narrowed in the second quarter.
Editorial office finanzen.net
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