Tesla faces questions on recession, EV credits, Cybertruck

Tesla Inc. CEO Elon Musk has been sparring over geopolitical events on Twitter in recent days, but analysts and investors will try to refocus the tech billionaire on issues such as vehicle supply and demand during the automaker’s earnings call on Wednesday.

Questions suggested by institutional and retail investors touch on Tesla’s ability to qualify for EV incentives through the Inflation Reduction Act, the automaker’s resilience in case of a U.S. economic recession and the timing of new products like the Cybertruck pickup.

“Can you talk about how Tesla could adjust if we were to enter a prolonged recession?” reads one question submitted to the automaker. “How is production planning going for the Cybertruck?” reads another. Some of the questions will be read on the earnings call.

Musk, who warned this week of nuclear war in the absence of a Russia-Ukraine peace agreement, confirmed on Monday that he would participate on the call.

Other suggested questions include the timeline for rollout of Tesla’s next-generation battery cell known as the 4860, and the likelihood of a stock buyback program.

The EV maker’s stock price has been under pressure since early October, when it reported global sales and production for the third quarter.

Tesla missed market expectations but still delivered a record 343,830 vehicles for a 42 percent increase vs. last year. The Automotive News Research & Data Center estimates a 47 percent sales increase for the quarter, to a record 114,000 vehicles for the U.S.

Those are big growth numbers amid industry supply constraints, but Musk has set a goal of 50 percent annual sales growth for the foreseeable future. Tesla’s stock market valuation is based partially on growing to millions of units annually vs. last year’s sales of 936,172 vehicles.

Through the first nine months of 2022, Tesla’s sales growth ran at about 45 percent. If that continues, the EV maker could miss its informal 1.4-million sales target. In its favor are new factories this year in Texas and Germany and expansion in China.

One possible sign of easing demand, according to some analysts, is the 22,000-unit gap between production and deliveries in the third quarter. Tesla is usually able to deliver the vast majority of its production through aggressive end-of-quarter pushes.

Tesla said in a statement that all of the 365,923 third-quarter vehicles had been ordered by customers, but that it faced challenges securing enough transport to deliver them.

In the U.S., Tesla is also facing its first signs of real competition in the EV market.

“Its market share in the U.S. electric vehicle market may come under threat as legacy manufacturers ramp up battery-only car production, while demand for [EV] propulsion technology could wane once early adopters are satisfied,” Bloomberg Intelligence said.

Adding to the uncertainty are rising inflation and interest rates, which can eat into profits and slow sales. Tesla, with four models, has also fallen behind on its product roadmap, particularly for the Cybertruck pickup, now due sometime next year.

Despite missing market expectations for global third-quarter sales volume, Tesla’s rising average transaction price could deliver the financial performance that Wall Street covets, according to some analysts.

Reuters said the Texas-based company is expected to report a 60 percent increase in revenue, to just under $22 billion from $13.8 billion a year ago, according to the mean estimate from 25 analysts, based on Refinitiv data.

Zacks Equity Research estimates Tesla’s total automotive gross profit for the third quarter at $5.9 billion, compared with $3.7 billion a year earlier.

“In addition to lower than anticipated total deliveries in the third quarter of 2022, high costs of raw materials and logistical constraints are expected to have weighed on margins,” Zacks said this week. “However, Tesla is likely to have benefited from the rise in average selling price.”

Tesla, which had about two-thirds of the U.S. EV market through September, commanded an average transaction price of $69,831 in August, a 31 percent increase since early 2021, according to Kelley Blue Book.