From ZeroHedge, March 22:
Goldman Takes A Field Trip To Tesla & Rivian
Last month, Morgan Stanley analyst Adam Jonas described the electric vehicle industry as "extremely negative" and predicted further deterioration. Following this assessment, Goldman Sachs analysts met with executives from Tesla and Rivian on Thursday to delve deeper into the industry's challenges.
Goldman's Mark Delaney and other analysts first met with Tesla executives at the Fremont factory, including Martin Viecha (VP of IR), Abhinav Davuluri (Investor Relations Lead), and Travis Axelrod (Sr. Staff Program Manager, IR). They chatted about everything from the EV slowdown to vehicle pricing to the Cybertruck and artificial intelligence.
Here's a summary of what was spoken about:
Tesla is between growth waves; new products a key consideration: According to the comments from its last earnings call, Tesla is currently between two growth waves, and expects notably lower growth in 2024. Ramping new and refreshed models, and entering additional countries, could contribute to growth this year. Tesla is now using some digital advertising. The company has faced certain headwinds to production this year in Berlin, including the Red Sea conflict and loss of power. As Tesla shared on its last earnings call, new products like a vehicle using the low-cost platform could help to re-accelerate growth, and the company is targeting 2H25 to begin production of this product in Texas.
Tesla remains flexible with pricing and plans to stay FCF positive on an annual basis: Tesla continues to actively monitor pricing, and has regularly adjusted pricing in key markets. As communicated on recent earnings calls, the company plans to stay FCF positive on an annual basis, even if it is more aggressive with pricing. Lower pricing could put more vehicles on the road and create an opportunity to monetize software and services.
As we highlighted in our note The price is right? The case for Tesla to be more selective on US price cuts; analysis on EV pricing and IRA we believe that Tesla should be firm with pricing for Model 3/Y in the US as the vehicles are attractively priced, particularly with IRA credits and our analysis shows that broad-based incremental price cuts would be negative for profits at least in the short term (although a more entry-level SKU of the Model Y with a lower BOM could help Tesla to expand volumes while supporting overall margins/profits in our opinion). However, we believe Tesla is facing a higher degree of competition internationally, especially in China, and a somewhat more aggressive approach to pricing may be needed there.
Tesla continues to be optimistic on AI and what it could enable for its products: The company is optimistic on what AI will mean for its technology, with FSD Beta 12.3 being a step change forward and exhibiting more human-like behavior. Increasing GPU capabilities should help to accelerate development.....
....MUCH MORE
