- Without serious financial injections, Tesla will not be able to exist for a long time, but the patience of investors this time may come to an end
- Trouble in the Chinese market came at an opportune moment as the company completes the construction of a facility in China
- The current structure of expenses and income does not inspire analysts with any optimism, and this is the unanimous opinion
After the publication of a not-so-inspiring quarterly report, which again showed losses, Tesla decided to replenish capital through another sale of shares and the placement of debt obligations, which creditors, by the time of redemption, will be able, again, to convert into those very shares of the company. An appeal to employees issued by Tesla's management, in which Elon Musk called for the most severe savings, made a lot of noise in the investor community: the Tesla founder directly said that the company's funds would be enough for ten months of activity, if measures were not taken to savings.
Of course, all this could not inspire industry analysts, and after some thought they rushed together to reduce their forecasts for the market value of Tesla shares, which only exacerbated the negative dynamics of the quotes of these securities. On what the pessimism of analysts is based, we will try to understand our material.
Electric cars burn, reputation suffers
An unpleasant incident in Shanghai was recently made public, where a Tesla Model S, quietly standing in a covered parking lot, first smoked, and then flared up for no apparent reason. Cases of ignition of electric vehicles of the brand were observed before, but most of them were associated with mechanical damage to traction lithium-ion batteries, as a result of which they lost stability and dangerously overheated. Tesla even had to publish a special guide for rescue services on extinguishing electric vehicles involved in an accident, which indicated the place of a forced break in the high-voltage power circuit, and also gave recommendations for controlled cooling of the traction battery pack for several hours after the damaged electric vehicle was evacuated from the accident site.
The statistics of fatal accidents does not add confidence in the reliability of Tesla's proposed automation systems for the control processor of electric vehicles. In March of this year, the driver of a Tesla Model 3 was killed in a collision with a truck in Florida. Automation was unable to prevent the accident, although it was activated ten seconds before the collision. The driver did not hold on to the steering wheel during the last eight seconds before the collision, and the electric vehicle crashed at a speed of 109 km/h into the side of the semi-trailer of the truck, which began to turn left. Diving Tesla Model 3 under a semi-trailer led to the cutting of the roof of an electric car and the death of a fifty-year-old driver.
An attack on the reputation of Tesla's "autopilot" can also be considered a recent publication by Consumer Reports, which tested the current version of software designed to allow an electric car to automatically change lanes. The authors of the review concluded that automation in its current version drives an electric car more dangerously than the average driver. Lane changes are sometimes carried out without observing a safe distance from a passing car traveling behind, and also without giving priority to other road users in accordance with the existing rules. Cases have been noted when Tesla automation unobtrusively suggests changing lanes to the oncoming lane if there is a vehicle on it.
Echo of a possible deal with Apple to support the stock price Tesla did not help
Tesla's financial strength has always been far from ideal, but now analysts are literally ganging up on the company, publishing negative forecasts one worse than the other. Morgan Stanley experts lowered their forecast for Tesla shares to $10 a share, calling the saturation of the market with electric vehicles the main threat to the company's future activities. According to them, the demand for Tesla products will not continue to grow at the same pace, although the company will expand both sales markets and production geography, as well as the range of models. Many experts also consider Tesla’s problem to be the lack of proper financial discipline - it always overestimates its own capabilities, and, in simple terms, “grabs everything at once.”
Some support for Tesla's share price this week was provided by Roth Capital Partners' representatives' mention of Apple's intention to buy the company for $240 per share. Now Tesla shares are much cheaper than this level - $ 192 or less. However, representatives of Morgan Stanley believe that at the current level of development of the “autopilot”, neither Apple nor Amazon, which demonstrate the presence of ambitions in the transport sector, will not show interest in Tesla assets. It will take at least another decade for such initiatives to reach the right level of maturity, and companies far from the automotive industry simply will not risk money in the coming years.
In addition, while the first steps in the field of driving automation are associated with reputational costs due to fatal incidents and fires, third-party investors will look wary in the direction of Tesla. The way out for a company rapidly losing money and trust could be cross-subsidization, which Musk has already tested with the example of a subsidiary of SolarCity. This time, Tesla's own aerospace company, SpaceX, can act as the savior of Tesla.
China: From Illusory Hope to Illusory Threat
In its plans, Tesla made serious bets on the Chinese market, where government programs stimulate the transition to more environmentally friendly electric vehicles, and the capacity of the entire market in China is much larger than in all other countries. By importing its electric vehicles to China, Tesla is forced to spend not only on transportation from the United States, but also on customs duties, which, against the background of the confrontation between the two countries, show a tendency to increase. This was partly offset by a reduction in the final selling price, but the main response to such measures was to be the construction of a factory in Shanghai, where the production of not only traction batteries, but also electric vehicles would be launched - first Model 3, and later Model Y. Their export was planned in the future. establish in other countries of the continent.
Tesla has not only borrowed $500 million from a syndicate of Chinese banks to build a plant in Shanghai, but has already completed the construction of production buildings. By the end of the year, Tesla expects to produce at least 3000 Model 3s at its Chinese facility, and in the first full year of operation, produce at least 200 electric vehicles. It is unlikely that the growth of tension in relations between the United States and China will not affect Tesla's plans in this region, and the realization of this fact also does not please investors.
Interestingly, some experts tend to be skeptical about the demand potential for Tesla electric vehicles in the Chinese market. Until now, the bulk of sales here have come from the more expensive Model S and Model X, which were purchased by legal entities. In some cases, electric cars were not even used for their intended purpose, but acted as a kind of scenery in real estate advertising, shaping a sense of prosperity among potential buyers of the area in which they were shown. Moreover, the bulk of the Chinese live in apartment buildings, the charging infrastructure is not so well developed, and this will serve as a deterrent to the spread of Tesla products for now. Moreover, the Chinese market already has a lot of much more affordable electric vehicles of local brands.
Demand will not grow forever, you will have to sacrifice profitability
Tesla recently made a price adjustment on the Model S and Model X, lowering their base values by a couple of percent. At the same time, the average price of Model 3 was increased by one percent. The latest model has a much lower rate of return, so the cheaper older models will not have the best effect on the company's income. In addition, the focus is on increasing the production of more affordable electric vehicles, including the promising Model Y crossover, and this promises not only a decrease in profitability, but also an increase in capital costs.
Finally, a recent fundraising initiative and a recommendation to employees to get used to austerity indicate that Musk's original plan to achieve self-sufficiency through increased Tesla Model 3 sales has not paid off. Analysts feel this, and therefore they express dissatisfaction with the current structure of the company's expenses and income. Tesla shares have no choice but to steadily decline since the beginning of this year.
Source: 3dnews.ru