Weak prospects for NASDAQ shares Tesla & Co.: Morgan Stanley sees the e-car market facing a slowdown

• Tesla misses market expectations in fourth quarter
• Morgan Stanley foresees many difficulties in 2024
• Elon Musk remains optimistic

Growth is slowing at the electric car pioneer Tesla. Sales in the fourth quarter of 2023 only grew by three percent to $25.17 billion, which was below analyst expectations, who on average had expected revenue of almost $25.9 billion. Although the quarterly profit climbed sharply from 3.7 billion in the same quarter of the previous year to 7.9 billion US dollars, the market expectations were missed at 71 US cents in earnings per share.

In addition, contrary to expectations, the group did not provide a sales forecast for 2024 – only the warning that deliveries will grow noticeably more slowly. Even before the balance sheet was presented, the US investment bank Morgan Stanley had maintained its buy recommendation for Tesla, but was faced with numerous difficulties worldwide Electric carmarket in 2024 and therefore lowered their price target for Tesla shares from $380 to $345.

Discount battle

Morgan Stanley analyst Adam Jonas and his team referred to the tough competition in the EV market in a note to customers, reports “Business Insider”. Tesla was able to defend its market leadership throughout 2023, but had to reduce its prices several times, which was at the expense of margins. Although Tesla’s profit margins were still higher than those of its competitors at the beginning of the fourth quarter of 2023, the gap has narrowed.

Incentives to buy are decreasing

Morgan Stanley analysts are also concerned about the dwindling government incentives to buy an electric car. In the USA, the list of vehicles eligible for a tax credit has shrunk to just 13 vehicles, only three of which are Tesla models.

As a result of the presidential election in November, there is also growing uncertainty as to whether the government support introduced by the Biden administration will even continue. “A possible withdrawal of incentives for electric cars would be an obstacle to the spread of electric cars,” Jonas wrote in his note.

In addition, government incentive programs could also be scaled back in other countries when governments review their budgets in 2024, according to the analyst. This can already be seen in Germany, where the federal government abruptly canceled a purchase bonus for electric cars in mid-December as part of its savings plans.

Uncertain residual values

The mix of rebates and government incentives also means that electric cars now have some of the worst resale values ​​in the automotive industry. Jonas also fears this will have negative effects on pricing in the longer term.

The expert worries that this could deter consumers and especially leasing partners “who do not want to take the risk”. For example, the car rental company and Tesla partner Hertz announced at the beginning of January that it would sell a third of its global EV fleet and replace these vehicles with gas-powered cars.

Damper in China

Although global sales of electric cars have increased significantly in recent years, the supply has also increased significantly because more and more car manufacturers have entered the EV market. As a result, Adam Jonas believes the EV market is now oversupplied.

In China, probably the most important market, there is already an imbalance between supply and demand for electric vehicles because, on the one hand, the economy is weakening, but on the other hand, electric car production has continued to increase in recent years. In view of this, the government in Beijing announced in January that it wanted to curb exports of electric cars and take action against excessive vehicle production.

Elon Musk remains optimistic

Tesla CEO Elon Musk nevertheless expressed optimism in the latest balance sheet presentation. He only sees the company between two waves of growth and believes Tesla could become the most valuable company in the world. He is optimistic about the “revolutionary” production process that Tesla is currently developing, with which, among other things, a cheaper compact model will be built from the second half of 2025. This cheaper model is of great strategic importance for the US company, which is struggling with increasingly tough competition from Chinese manufacturers.

Editorial team finanzen.net

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