Tesla (TSLA) Misses Consensus Expectations With 405,278 Units Delivered In Q4 2022 – Upcoming Catalysts Could Pave The Way For Troubled Inventory Recovery

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Bulls are unlikely to remember the 2022 Tesla with any fondness. After all, the stock ended the year with a loss of about 70 percent. In its day, Tesla was the fifth largest component of the S&P 500. Now, after weeks of brutal selling, which saw the stock’s daily RSI hit an all-time low of 17 in the last week of December, Tesla is ranked #4 Ten by far the largest component of the benchmark index, just below the likes of Exxon Mobil.

Tesla (NASDAQ: TSLA) delivers 405,278 units in the fourth quarter of 2022

Tesla just revealed that it delivered 405,278 units in Q4 2022, missing the cutback consensus forecast for 418,000 units. The EV giant managed 439,701 units in the relevant quarter. For the entire 2022 fiscal year, Tesla recorded cumulative deliveries of 1,313,851 units. Keep in mind that Tesla has maintained over the past few quarters that it will increase its annual production by 50 percent for the foreseeable future. Tesla produced 1,369,611 units in 2022, and its total production in 2021 is 930,400 units (production required to meet guidance = 1,395,600). This means that Tesla only managed to increase its annual production by 47 percent in 2022.

For comparison, BYD — China’s largest electric vehicle maker — managed to deliver 111,939 EVs in December alone. When plug-in hybrid vehicles are counted, BYD recorded sales of 235,197 units in December 2022. In the fourth quarter, BYD delivered 329,011 battery-powered vehicles. For the entire 2022 fiscal year, BYD reported cumulative new electric vehicle (NEV) sales of 1.863 million units, up 208.64 percent year-on-year.

Tesla faces a real set of challenges

As we noted in a December post, Tesla still faces a number of headwinds. Since November 2021, Elon Musk has sold $39.3 billion worth of Tesla stock, hurting the stock in the process. While Musk made a pledge that he wouldn’t sell any additional shares in Tesla until at least 2024, the market continues to dismiss such explicit guidance, especially since this isn’t the first time a Tesla CEO has made such a pledge only to walk back with nary a comment.

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The Chinese market is of crucial importance to Tesla’s finances. According to a Refinitiv estimate, China accounted for about a quarter of all Tesla sales in the first nine months of 2022. Moreover, according to Morgan Stanley, China accounts for about half of Tesla’s profitability. In the fourth quarter of 2022, Tesla’s performance in China was unmistakably affected by the country’s COVID-free policies. To counter this macroeconomic handicap, Tesla cut the prices of its electric vehicles by as much as 9.4 percent in China in October. At the time, that decision was justified as a shrewd attempt to take advantage of the soon-to-expire 12,000 yuan subsidy that China offers on all electric vehicles retailing for less than 300,000 yuan. The price cut allowed the standard Tesla Model Y range to qualify for this incentive by lowering the model’s price to 288,900 yuan. Tesla also started offering a 10,000 yuan discount for new orders in December. Of course, China has now partially relaxed its strict anti-coronavirus policies. However, this relaxation is now fueling a vicious wave of infections that is currently acting as a major drag on the world’s second largest economy. Moreover, with the Chinese New Year approaching, the electric car giant is said to be planning to run Giga Shanghai at a reduced level, with production halted from January 20th through January 31st.

Perhaps to neutralize this growing softness in China, Tesla offered a rare $7,500 discount to new US buyers in December, as well as free access to its network of superchargers for 10,000 miles of charge.

During a pandemic, used Tesla EVs can sell for a comfortable premium, which creates a whole kind of additional demand. However, with the Federal Reserve determined to cool the US economy, that premium has now evaporated. According to Reuters, the average price of used Tesla electric cars is down 17 percent from a July high of $67,279. For reference, the overall used car market in the United States is down just 4 percent over the same period. It is clear that the demand for Tesla electric cars is weakening.

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Tesla also continues to take the heat on the safety scorecard for its Advanced Driver Assistance System (ADAS), dubbed Autopilot. In August, the California DMV accused Tesla of misleading customers regarding the capability of its Autopilot system. A customer also sued the company that same month for “deceptive marketing”. Then, in October, reports emerged that the US Department of Justice, as well as the Securities and Exchange Commission, were maintaining ongoing investigations into Tesla’s Autopilot allegations. According to a scheduler By Taylor Ogan, CEO of Snow Bull Capital, “The average miles per disengagement in the FSD beta is getting worse*, down 54% year-over-year.” It remains to be seen how the new FSD Beta update – due in January 2023 – performs. According to InsideEVs, the new update will allow the steering wheel mood to be turned off.

Keep in mind that Tesla has now abandoned its current approach of relying solely on its vision-based Autopilot system, which consists of eight high-resolution cameras and a high-tech neural network to interpret incoming visual signals, and is now working to re-integrate HD radar into its suite of sensors. .

Finally, Elon Musk’s preoccupation with Twitter appears to be clearly hurting the Tesla brand. For example, according to file German survey63 percent of respondents said that Elon Musk’s behavior has negatively affected their perception of Tesla.

2023 brings new hope for the Bulls

Tesla experienced a fierce sell-off in the last week of December, with about 700 million shares, or about 25 percent of the total float, changed hands over the course of just three trading days! Of course, harvesting the tax loss was likely the reason for this massive business. In an insight into the Tesla bulls, investors can buy back shares they sold within 31 days while still booking a loss for tax purposes. This phenomenon is likely to provide a significant tailwind for Tesla stocks in January 2023.

Tesla’s market capitalization is currently only $385.98 billion. Moreover, Wall Street expects the company to record $113 billion in sales in fiscal 2023. That equates to a forward price-to-sales ratio of just 3.41 times. Not long ago, Tesla was trading at an 80x P/S multiplier! Obviously, these are the things that generational bottoms are built from.

The above tweet from future fund Gary Black highlights some notable catalysts for Tesla in 2023. In the short term, the Biden administration’s inflation bill could be a huge boost in demand for Tesla. The law restored the $7,500 tax credit to mature electric vehicle makers like Tesla. However, the incentive comes with a set of sourcing requirements for key components, including batteries. Crucially, the Treasury Department will not make a final decision on these material sourcing requirements until March 2023, allowing US buyers to take advantage of the full $7,500 credit until then.

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Do you think the electric giant’s bulls can look to a sustainable recovery through 2023? Let us know your thoughts in the comments section below.

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