VALUATION HIGHLIGHTS
- Automotive constitutes 82% of the Trefis price estimate for Tesla Motors's stock.
WHAT HAS CHANGED?
Tesla's Q4 2024 Earnings
Tesla posted a weaker-than-expected set of Q4 2024 results. While revenue came in at $25.7 billion up 2% year-over-year, adjusted earnings per share came in at $0.73. Tesla has indicated that its profitability was being impacted by higher costs of its R&D projects, as well as lower average selling prices for its EVs.
Will A Trump Administration Help Tesla?
With President Donald Trump back for a second term, Tesla could benefit, given Elon Musk’s pivotal role in his 2024 campaign. Tariffs on imports could shield Tesla from foreign competition, while reduced regulatory oversight could support its AI and moonshot projects. Additionally, the removal of EV subsidies in the U.S. could work in Tesla’s favor, as its position as the lowest-cost EV producer may help it gain market share. With Trump in office, further policies and support structures could emerge, directly or indirectly benefiting Tesla.
BUSINESS SUMMARY
Tesla is focused on designing, manufacturing, and selling electric vehicles and related technologies. The company's current model line-up includes the Model S luxury sedan, the Model X luxury SUV, the Model 3 sedan, the Model Y compact SUV, and the Cybertruck pickup truck. Tesla also sells renewable energy products such as solar panels and battery technology. The company's upcoming products include the Semi truck and the second-generation of the Roadster sports car.
SOURCES OF VALUE
Most of Tesla's value comes from its mass-market vehicles, such as its Model 3 and Model Y.
Future model launches
Tesla currently offers five vehicles: Model 3, Model Y, Model S, Model X, and the Cybertruck pickup truck. Tesla is expected to take its first step away from the luxury passenger vehicle market into the commercial space, with plans to launch an all-electric semi-truck.
Transition to EVs a global priority
Under former President Joe Biden, the U.S. has pledged to achieve carbon neutrality by 2050. We are seeing similar commitments from other developed countries across the world. This means that the process of decarbonizing the transportation space will have to speed up, with gasoline-powered vehicles being replaced with cleaner EVs and hybrids. This should bode well for Tesla, one of the market leaders in the premium EV space.
KEY TRENDS
Falling battery costs to help the adoption of electric cars
According to Bloomberg New Energy Finance (BNEF), the industry average battery cost (cell plus packaging) dropped from $288 per kilowatt-hour in 2016 to $132 in 2021, driven by higher volumes and technological advancements. Costs ticked up in 2022 due to supply chain issues but declined to about $128 per kilowatt-hour in 2023 and $115 per kilowatt-hour in 2024. Tesla likely benefits from even lower costs than the industry average, given its scale as one of the largest EV makers.
The electric car space is getting increasingly competitive
Mainstream automotive manufacturers are getting more serious about their electric vehicle programs as they look to take advantage of all-electric drive trains' performance and cost advantages. For instance, Volkswagen announced it would invest as much as 70 billion euros (~$84 billion) in bringing around 300 electric models to market by 2030.
