Strong Deliveries Don’t Alter the Bear Case


No one can accuse Elon Musk of lacking in ambition and often throughout his career, Tesla’s (TSLA) detractors have had to beat a hasty retreat after underestimating the guru-like CEO’s ability to defy the skeptics. However, following the EV leader’s 2021 Annual Meeting, Needham’s Rajvindra Gill thinks the company’s ambitious goal does not seem realistic.

The company reiterated its intention to deliver 20 million EVs by 2030 while at the same time making their offerings more affordable.

“Although we believe that EVs will becomes cheaper over time,” said the 5-star analyst, “The goal of 20MM seems improbable considering the manufacturing footprint requirements that this would entail over the next 8-9 years.”

Based on the assumption that 100 — 120 million “light vehicles” are produced per year, this would amount to a 15-20% share of the world’s light vehicle market, a feat Gill is “skeptical” Tesla has the means to achieve.

With a present “production base” of 1 million vehicles, and the potential to add an extra 1 million soon with the Giga Texas and Giga Berlin factories, Tesla would need capacity for 18 million more to achieve this goal. Assuming 500,000 vehicle capacity at each plant, then an extra 36 Gigafactories would be needed in order to hit the target.

With work currently ongoing, Musk has suggested that capacity at Giga CA and Giga NV could be increased by 50%. Even so, with 750,000 vehicle capacity, Tesla would need 24 new Gigafactories at a CAPEX roughly $125 billion, over a period of around 8 years, equating to 3 per year, more than the present 2 additions per year, an endeavor which Musk himself admits “is challenging.”

“In the face of ever-increasing competition from other auto OEMs with EVs, these goals look even more difficult,” the analyst summed up.

And although Gill admits momentum is on the company’s side after the latest quarterly deliveries “exceeded expectations,” given the stock’s valuation, the analyst remains cautious on all things Tesla.

Accordingly, Gill reiterated an Underperform (i.e. Sell) rating, without suggesting a fixed price target. (To watch Gill’s track record, click here)

A look at the consensus breakdown does not inspire much confidence either. TSLA stock’s Hold consensus rating is based on 12 Buys vs. 7 Holds and Sells, each. Over the next 12 months, shares are anticipated to lose ~15% of their value, given the average price target clocks in at $691.71. (See TSLA stock analysis)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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