Despite Tesla Inc’s high voltage performance in sales and deliveries, as well as a 12 percent rally in the share market over the last month, skeptics remain unconvinced about the prospects of the company.
According to a Bloomberg MLIV Pulse survey, 54% of respondents highlighted the increased risk of industry competition, while 26% expressed concerns about the behavior and decisions of Tesla’s CEO, Elon Musk, as significant factors for Tesla shareholders.
In the survey, 67% of participants expressed the opinion that the billionaire executive should prioritize focusing on the carmaker. Concerns arose as Elon Musk appeared to divert his attention to other ventures such as his social media platform, Twitter, and space exploration company, SpaceX, over the past few months.
Both investors and skeptics share equal concern that as Elon Musk directs more attention towards his other businesses than Tesla, competitors could potentially capitalize on the situation and surpass Tesla in the race for sales and deliveries. They fear that this diversion of focus might create an opportunity for rival companies to gain an advantage in the market.
While Tesla currently maintains a significant lead over its competitors, particularly in the United States and China, there is still cause for concern as some rival companies have shown an increasing trajectory in the last few months.
China’s BYD Co. achieved a sales record for the second quarter by delivering 352,163 fully electric vehicles, while Tesla also reached an all-time high with 466,140 EVs handed over to customers worldwide. BYD Co. has been gaining ground on Tesla in the electric vehicle market.
Additionally, General Motors Co. saw significant growth in the sales of its Bolt electric vehicle in the US, although it started from a smaller sales base. These achievements highlight the increasing competition in the electric vehicle industry.
Analysts and investors are expressing concern and caution, warning that Tesla’s current advantage in the electric vehicle market could erode rapidly. The implementation of government policies, such as the US’s Inflation Reduction Act, is encouraging other automakers to embrace and invest in electric vehicles (EVs).
Craig Irwin, an analyst at Roth Capital Partners, emphasized that competition stands as the most critical risk factor for Tesla in the long run. With approximately 100 new EVs expected to enter the market this year, even if their execution is mediocre, it could exert pressure on Tesla. While Tesla currently holds a substantial lead over its competitors, it is essential to monitor how this advantage may diminish in the face of increasing competition.
Tesla’s high sales and deliveries are largely attributed to recent price cuts, as noted by around 63% of the MLIV Pulse respondents. To capture higher volumes, many expect Tesla to continue reducing prices, but this has already impacted its once hefty profit margin.
If Tesla continues implementing price cuts to boost sales volume, it will continually reduce its profit margins, posing the risk of approaching the profit margins of other auto companies. This could potentially lead to a precarious situation for Tesla.
The impact of these price cuts on Tesla’s profits will become evident when the company reports its second-quarter results this Wednesday. Analysts’ average profit estimates for the quarter have decreased by 29% compared to six months ago.
