Elon Musk is the boss of Tesla. Slaven Vlasic/Getty Images
Tesla is likely to soon lose its place as the world’s most popular electric car maker to Chinese rival BYD.
But Tesla doesn’t need to sell the most vehicles to win the electric vehicle war, a Wall Street analyst said.
Elon Musk’s company could still be on top if it leverages its strengths to improve profit margins.
This is a machine translation of an article from our US colleagues at Business Insider. It was automatically translated and checked by an editor.
Chinese automaker BYD is expected to overtake Tesla as the world’s best-selling electric vehicle company in the coming days.
But Tesla doesn’t have to sell more EVs than other automakers to win the EV war, said George Gianarikasa managing director at Canaccord Genuity, on Wednesday on American channel CNBC.
Gianarikas said that Tesla right now is similar to Apple when the smartphone industry started.
“Apple had, so to speak, 100% market share because they were the first to bring a real smartphone to market. The same goes for Tesla,” he said. “Asian competition came into the smartphone market, and the same thing is happening in the electric vehicle market, and at some point Tesla will probably be overtaken in terms of unit sales.”
However, Gianarikas, who has a Buy rating on Tesla and a price target of $267, said investors shouldn’t get too hung up on Tesla selling the most electric cars. Tesla shares closed at $261.44 on Wednesday.
“That Tesla will win over time”
“What matters most, and we believe Tesla will win over time, is the battle for profit share,” Gianarikas said. “Today, Apple doesn’t have the largest market share in smartphones, but it does overwhelms the market in terms of profit shareand we believe that ultimately that will be the most important thing for Tesla, and we believe that that will happen.”
According to one Reuters Report, citing analyst surveys from LSEG, Tesla is expected to deliver around 1.82 million vehicles in 2023, up 37 percent from 2022. However, to reach this milestone, the electric car maker has been cutting the prices of its vehicles throughout the year. And these price cuts have impacted profit margins.
Tesla posted a profit margin of 17.9 percent in the third quarter of this year, compared to 25.1 percent a year ago.
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However, Gianarikas said he believes Tesla has a strategy to get the company back on track.
More money through software sales
“This year, Tesla cut prices, which impacted gross margins. We believe this was intentional, and over time they expect to sell a lot of FSD (Full Self-Driving) software to people who already own their vehicles. That’s the key to this story because right now profit margins have suffered. “We believe that’s the long-term plan: to sell FSD software the way Apple sells services,” Gianarikas said.
“We believe that the FSD software and vertical integration that Tesla has mastered best in the world will ultimately result in superior gross margins and profits for its electric vehicles compared to all other companies in the market,” he continued.
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2023-12-28 06:27:06
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