Tesla

The Cybertruck was released at a price 25% higher than most were expecting. That means demand will be limited for the next couple of years until pricing comes down. Importantly, the Cybertruck is the latest evidence that Tesla makes the best electric vehicles in the world and is pulling ahead as traditional auto mistakenly slows their EV pursuit.

Over the past month, there has been a surprise twist in the battle between Big Auto and Tesla: Traditional carmakers are slowing investment in EVs and autonomy. While the move is good for traditional auto profits over the next 1-3 years, it will likely make the inevitable EV transition more costly. In the end, I believe Tesla will emerge in a better long-term competitive position.

Tesla's September results and outlook commentary revealed a double whammy of pressures on the business, prolonged margin pressure, and dampened demand outlook. While this next year will be the most difficult period for the company since the ramp of Model 3 in 2019, I believe the long-term opportunity remains intact: The company has a pole position in what will be a massive market transition to electrification.

For Tesla earnings it's all about the margins. While I expect a miss in September, I believe margins will rebound in December. In this scenario, the case that Tesla should be viewed as a tech company will remain intact.

Big auto is in a tight place when it comes to transitioning its business to electric, and the current UAW discussions will eventually result in a steep increase in costs that will further push them into the red. Tesla, however, can afford the pay raise and will emerge as the winner from the labor talks.

Tesla's June quarter results were solid, as expected. Shares of TSLA traded down by 4% off management comments that implied auto gross margins will be down slightly in September due to production downtime for retooling and other investments. The hyper focus on near-term margins overlooks the long-term value the company is creating by aggressively investing in new models, production capacity, batteries, and FSD, all of which will lead to increasing margins over time.

Tesla's March quarter results took backstage to Elon Musk's earnings call comment that the company could sell vehicles (the hardware) at no profit because they could make "tremendous economics in the future through autonomy" software. This razor and blades model would require investors to rethink the Tesla investment case. In the end, I believe the company will strike a balance between margins and growth similar to what was just reported.

The DOE announced changes that make it easier for car makers to qualify for EV tax credits by adding Japan and South Korea to countries that can supply the anode and cathode to battery cells assembled in the US. This is a long-term headwind to the US gaining electrification independence.

Tesla’s investor day ended up being mostly about illuminating the wide lead Tesla has on other car makers. The much-anticipated topic of a Master Plan 3 outline left me with more questions than answers. We do know it will include at least two new models that are, at the earliest, a couple of years away. Big picture; investor day gave me confidence Tesla remains comfortably ahead of other automakers and has a plan for how to significantly ramp deliveries.

Tesla's December quarter earnings was all about the company's 2023 outlook after the recent price cut threw a wrench into how investors should think about the trade-off between deliveries and profitability. The essence of the guidance calls for 50% delivery growth this year, ahead of the Street's 37% target and gross margin ex credits of above 20%, compared to the concern of many investors that they would dip into the high teens. The bottom line: The company appears to have made the right decisions to successfully navigate what will likely be a difficult year for the auto industry.

When Tesla announced in early January that they would cut car prices in China by about 13%, I began to anticipate price cutting in other countries as well. What was most surprising about the news was the magnitude of price…

Tesla has had a horrible four months, highlighted by shares being down about 65%. While several factors played into the stock’s free fall, I believe the biggest reasons were expectations for slowing demand and its negative impact on profits. The…