Ahead of Tesla‘s forthcoming Earnings Call, Morgan Stanley has revised its price target for the company’s stock, signaling a cautious stance due to multiple market concerns. Despite Tesla’s 66 percent increase in share value over the past year, its performance in 2023 has seen a 15 percent decline. As 2024 approaches, analysts are expressing caution, given the array of challenges facing the electric vehicle (EV) sector.
Market Headwinds and Competition
Morgan Stanley’s advisory to investors highlights several headwinds that could impact global demand for EVs. The firm identifies growing competition, fluctuating prices, and a potential slowdown in EV demand as factors that could hinder Tesla’s performance. While Tesla has achieved significant milestones, such as meeting its 1.8 million delivery target and launching new models, the firm remains wary of the competitive and dynamic market landscape.
Analysts Express Concerns
The firm’s analysts have pinpointed specific risks, including price reductions, the phasing out of EV incentives, overcapacity in the Chinese market, uncertainty in residual values, and potential reductions in EV fleet orders. These factors suggest a challenging environment for Tesla and the wider EV market in the coming year.
Price Adjustments and Incentive Uncertainties
Tesla’s efforts to stabilize pricing have been met with investor concern, particularly as price cuts in China and Europe could strain margins. The company has adjusted prices to stimulate demand, but this strategy may affect profitability. Furthermore, the uncertain future of EV tax credits in the U.S. poses additional challenges, as they have been instrumental in making EVs more accessible to consumers.
China’s EV Market and Resale Values
In China, Tesla faces sales cannibalization, increased battery supply, and the expiration of local economic incentives, which could put pressure on the company. Additionally, price cuts by other manufacturers are impacting the residual value of EVs, creating hesitancy among dealerships and leasing partners due to the associated risks.
Shifts in Fleet Strategies
Notably, fleet operators are reevaluating their commitments to EVs, with companies like Hertz reducing their EV fleets and reallocating resources to combustion engine vehicles. This shift could affect the volume of orders for EV manufacturers and limit the exposure of consumers to EVs through rental experiences.
