High interest rates and inflation have led to a decline in sales of expensive electric cars. Stocks are being replenished worldwide. The used market is filled with cars for which there have been long waiting lists for delivery during the pandemic. Tesla started a price war. Chinese archrival BYD is winning the price war.
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Panasonic, one of Japan’s largest companies with more than 240,000 employees, has been one of Tesla’s most important partners for more than 15 years. The company invested $0.50 million in the electric car manufacturer when there was doubt whether Tesla would be able to deliver in 2010. The shares were sold at a profit of billions.
During its results presentation on Monday, Panasonic warned that weak demand for the Tesla Model S and Model
– We have succeeded in stabilizing inventories, but these plants will not operate at full capacity for some time, said Hirokazu Umeda, Panasonic’s CFO, during the results presentation.
Panasonic posted record half-year results in the skewed fiscal year that ended September 30 with pre-tax profits of 288 billion yen (21.5 billion kroner). Subsidies from the American market contributed strongly.
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CFO Umeda said the battery division would have posted a loss in the fourth quarter if not for subsidies from the U.S. Inflation Reduction Act, a giant support package worth about $370 billion that will be provided through tax breaks in exchange for, for example, cutting emissions. Carbon Dioxide.
– There is a price ceiling of $80,000. As more expensive car models exceeded that limit, demand slowed, Umeda said.
Panasonic produces batteries for cheaper car models in the United States.
Tesla prices drop
Panasonic’s earnings presentation put a new spin on Tesla investors when Wall Street opened. The stock price fell more than five percent on Monday. CEO Elon Musk warned during a results presentation in mid-October that higher interest rates had impacted demand.
Tesla’s price has fallen by 18 percent in two weeks and by a third since its peak in July. London-based brokerage Bernstein on Monday set a 12-month price target for Tesla stock at $150 — roughly 25 percent below today’s stock price.
Throughout the year, Tesla optimists claimed that margins would stabilize as cost cuts increasingly offset the impact of price cuts. Instead, margins were below expectations and fell sequentially each quarter this year, Bernstein’s team, led by analyst Tony Sacconaghi, wrote in a new report.
The consensus is that Tesla will produce about 2.3 million cars in 2024. That’s half a million more than this year. Bernstein doesn’t think this is achievable and believes it will put pressure on margins and that Tesla will have to lower prices further.
-Tesla will see lower profit margins and disappointing unit sales. To increase sales by 500,000 units, Tesla would have to cut prices by 16%, pushing operating margins down by 750 basis points. We think Tesla may have to change its delivery forecast below consensus and face lower margins, Bernstein wrote.
Winner in the Chinese market
Tesla fired the first shots in the price war nearly a year ago. Chinese competitors have followed suit. They take market share. The electric vehicle market is growing strongly in Southeast Asia, among other countries. China’s BYD has begun its own production in Thailand, and Vietnamese company Vinfast was listed on the stock exchange in the United States this fall.
BYD, which was bought by Warren Buffett’s investment firm in 2008, is the biggest winner. The result after the tax changes was 16.2 billion yuan (24.7 billion kroner) – 82 percent higher than last year and setting a new record. Trading value increased by 38.5 percent.
– BYD appears to be the safest alternative to Tesla in the short term, given how disciplined it is in balancing volume growth with profitability. They have also increased their exposure to hybrid models, which have captured market share in China and contributed to higher margins, Kevin Nutt, who heads Asian equities at Tocqueville Finance, told Bloomberg.
The company sold more than 820,000 cars in the third quarter, an increase of 53 percent over last year. In September alone, BYD sold as many cars as the entire first quarter. BYD surpassed Japan’s Suzuki in the number of cars sold in the third quarter, and is only 400 cars behind Nissan, the third largest car manufacturer in Japan.
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