In a few months, Tesla (TSLA 4.92%) it went from the expensive market to the dud market.
The electric vehicle (EV) leader remains one of the best-performing stocks of the past decade and has soared through the early stages of the pandemic as the company reached a critical tipping point, delivering profitability and proving that electric vehicles they went mainstream. More recently, however, Tesla’s stock has fallen on reports of manufacturing slowdowns in China, a slight miss on its 2022 production target, CEO Elon Musk’s antics after buying Twitter, and the recent decision of the company to reduce the price of most of its vehicles. like 20%.
As a result, the stock is down 36% over the last three months, significantly underperforming S&P 500which increased by 11% during that time.
But could Tesla manage to beat the market in 2023? Let’s take a look and consider what next year can be for the EV producer.
Image source: Tesla.
Tesla in 2023: A lot of new challenges
For several years now, Tesla has essentially had the EV market to itself, at least in the US. However, this is quickly changing as new EV companies like Rivian and Shiny increase production and traditional car makers like GM and Ford elbow its way into the fast-growing market.
Other startup EV manufacturers are still well behind Tesla in terms of manufacturing capacity, but both they and traditional automakers are rapidly ramping up capacity. Ford, for example, sold just 13,258 of its Lightning F-150 EV pickups last year. It expects to produce 150,000 of them in 2023.
As the market becomes more crowded, Tesla will have to do more to stand out in order to maintain its leadership position and its strong operating margins. Its recent price cuts cast doubt on its ability to maintain those margins, although Musk has previously said that the prices of its vehicles should fall as their costs. In addition, the new lower price on the Model Y will allow buyers to take advantage of federal tax credits for EV purchases.
Seen in context, Tesla decision to lower prices It seems like a tactic intended to help maintain market share and fend off competition. However, it will come at a cost to the bottom line, and Wall Street analysts have already lowered their 2023 earnings and revenue estimates for the company.
Finally, Tesla’s brand and reputation seem more at risk than ever, as Musk’s acquisition of Twitter has made it even more of a lightning rod for controversy than it was before, and the automaker’s EVs themselves they seemed to lose some of their luster. According to a Morning Consult poll conducted this month, 13.4% of American adults surveyed have a favorable view of Tesla, up from 28.4% a year ago. While he seems to have become quieter about his posts on the social media platform, this kind of brand damage is hard to overcome, and some of those potential Tesla customers may be gone for good. .
Tesla’s plans for 2023
Tesla, of course, did not plan to stand still this year. Musk previously outlined a multi-year goal of increasing production by 50% each year. To reach that goal, the company would need to make almost 2 million vehicles by 2023. It also plans to start mass production of its Cybertruck by the end of the year (it had originally intended to do this in 2021 ), and is growing. capacity at its Texas Gigafactory with a $775 million expansion in order to increase production of the Model Y and begin rolling out Cybertrucks. Finally, it also plans to build a new $10 billion factory in Mexico, which would be its sixth factory.
And just weeks after delivering its first Tesla Semi to Pepsithe company is increasing the production of those heavy trucks with the goal of producing 50,000 of them in 2024.
Tesla will need to continue to expand its production capacity to gain market share, meet investor expectations, and meet more of the growing demand for EVs.
Will Tesla beat the market in 2023?
Heading into 2023, Tesla faces a number of headwinds, including brand damage and price cuts. Also, if the economy sinks into a recession, this would almost certainly weigh on Tesla and other high-end car makers.
At this point, expectations for Tesla and its pure-play EV peers still seem too high, especially with challenges emerging from Ford and other traditional carmakers. Whether Tesla beats the market this year will likely depend on how well the overall market performs, as sentiment toward EV stocks tends to be more favorable in a largely bullish environment.
However, with its profit margins expected to contract and competition on the rise, 2023 is expected to be a tough year for Tesla shares.
However, it is a mistake to focus on the performance of shares in a single year, as in the short term, market dynamics can have a greater influence on share prices than the fundamentals of business.
Taking a longer view, if Tesla can meet its production goals, gain market share in the automotive sector, and maintain its industry-leading profit margins, the stock could be a winner from here – especially after it sank so significantly in 2022.