Tesla (TSLA) stock is surging amid data coming out of China, showing that the automaker will likely deliver a strong quarter in this important market.
At the time of writing, Tesla’s stock is up 6%, while the market is up about 1%.
This surge comes after the China Merchants Bank International released car insurance registration data; the data shows 106,915 new Tesla vehicles registered in China between January 1 to March 19.
It is tracking ahead of the last quarter, which was a record quarter for Tesla in China, with 122,038 cars delivered.
With almost two weeks left in the quarter and Tesla often delivering more vehicles over the last few weeks of a quarter, the automaker is expected to beat its latest record in China.
China is a critical market for Tesla and electric vehicles in general. Tesla’s performance in China often makes the difference in whether it has a good quarter.
The increase in sales comes after Tesla slashed prices globally. The price cuts came to China first in early January.
Electrek’s Take
Everything points to Tesla having a great quarter for deliveries in Q1 2023.
Top comment by PeterO
Fred, you wrote, "However, the attention is going to be on Tesla’s gross margin. The price cuts successfully boost sales, but they will negatively affect its gross margin." Of course when you significantly drop prices you are going to lower your gross % profit margin. Also, even if Tesla vastly increased their sales their profit would increase but not their % of profit margin. IMO, the important goal is to grow demand/production/sales while still earning a credible profit.
Over the last few years, ending in 12/31/2022, Tesla had the major slice of the US BEV market pie, AND they could raise prices because the legacies were barely in the game. I still expect Tesla to dominate but their % of market will decrease simply because others are beginning to sell BEVs (although not in significant numbers in my opinion). The fact that Tesla maintained such a high % of the market share could be credited to Tesla's focus and committment to manufacturing and delivering BEVs and the legacies were not. Yes I know the legacies have big plans, building new factories, new strategic alliances ... I wish them great success. IMO one of the reasons the legacies were slow to market with their BEV/ZEVs is due to the impressive profits their ICEV operations were generating.
Legacy future BEV success will lower Tesla's market share% but Tesla will likely continue to produce impressive numbers and the legacies BEV gains will be at their ICEV's expense. It isn't reocket science.
However, the attention is going to be on Tesla’s gross margin. The price cuts successfully boost sales, but they will negatively affect its gross margin.
The good news for Tesla is that it had industry-leading gross margins. They are large enough to eat the price cuts, but investors are hoping for Tesla to still be in the double digits gross margin.
In Q4 2022, Tesla had a record of 405,000 deliveries globally. Investors are hoping for Tesla to beat that – likely only marginally.
The company has the capacity to produce about 2 million vehicles in 2023, and it wants 10 times that by 2030. Not many people outside of Tesla fans believe that it is possible, but there weren’t many people who believed Tesla would get to a capacity of one million people. But it did – and more.
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