Source: Mercedes-Benz Press Release

Tesla isn’t the only carmaker with an exclusive edge in the ownership of charging infrastructure. Ionna — an alliance between BMW, General Motors, Honda, Hyundai, Kia, Mercedes-Benz, and Stellantis — will be deploying 30,000 high-powered charge points across the U.S. and Canada that will be open to all car makes.

Across the U.S., given the overall paucity of charging infrastructure and the cost of a BEV, it stands to reason that PHEVs offer the next best option for the vast majority of buyers. The driving factor behind why BEVs are so heavily highlighted is the price: about 80% of all 2023/2024 variants announced in the U.S. are in the $50,000 – $200,000 range. The higher the price, the better the margin. Also, customers able to afford the ticket are tend to be more inured to the vagaries of the affordability crisis roiling America, thus making them more likely to be persistent buyers.

For all others, including those who want more flexibility in sustained usage, PHEVs are the way forward, which U.S. buying trends confirm over the past decade. Incidentally, China shows similar trends: while BEVs registered an 18.06% increase in sales in the first two months of this year, PHEVs registered a 74.93% increase in the same period. More than 70% of China’s public charging network⁵ is in 10 of the most economically developed provinces and municipalities, with only 30% of all charging points open to all car makes.

As it stands, Tesla’s current BEV market share is near-constantly being eroded due to a variety of carmakers offering a variety of value propositions, a more extensive dealer/service network and a longer operational history of success to the very same consumer segments it is currently catering to. Tesla’s original master plan in 2006⁶ indicated that its strategy was to manufacture luxury models first and then use the profits generated to finance a “low cost family car”, the first of which would likely have been the long-rumoured „Model 2“ priced at $25,000. A report this past Friday⁷ contends that this goal has been scrapped in the wake of fierce competition globally from Chinese EV makers offering much-cheaper models. Instead, the company intends to use the small-vehicle platform under development in its „Robotaxi project, which is expected to have an unveiling⁸ on the 8th of August.

The Robotaxi will likely be an extension of the company’s Full Self-Driving (FSD) capability, made available via a block sum of $12,000 or a monthly subscription of $199. However, the company indicates that an FSD-enabled vehicle doesn’t make the vehicle autonomous and requires „active driver supervision“. Currently, several major carmakers are focused on fully-autonomous driving but truly autonomous operation is still several years away; the requirements on the complexity of the AI to enable this is the primary bottleneck and regulators are loathe to approve fully-autonomous driving after a series of tests by many carmakers in the fray found them to be prone to mistakes and accidents. Nor is this the first time that Tesla CEO Elon Musk had promised a „Robotaxi“, with the most recent promise being in 2019 when he predicted that the „Robotaxi“ will be unveiled in 2020. He predicted that these autonomous cars would last 11 years and drive 1 million miles while making the company and the car’s operators $30,000 in profit each year.

Overall current sales trends and market competitors being able to offer a wider variety of interesting options in both of its primary geographical markets are major factors in the consideration of the stock’s valuation, which has been in general decline in the YTD. Barring a brief rally in February, the stock’s Price-to-Earnings (P/E) Ratio is down 31% from that registered at the start of the year. Given that the industry average is 15-18 versus the stock’s current P/E Ratio of 52.7, there is significant potential for this ratio to be corrected downwards another 20-45%.

While investors have shown some interest in the stock in the aftermath of the „Robotaxi“ announcement, there is also a significant amount of skepticism about the claims being implied by the company’s die-hard proponents. Near-term turbulence in the stock price can be expected but long-term opinion on stock valuation would be entirely in line with the majority of stock pickers‘ valuation unless the company can make some powerful and strategic announcements.

Footnotes:

1. „Tesla Trims Car Output in China as EV Sales Growth Slows“, Bloomberg News, 22 March 2024
2. „Focus: The battery test race to work out what used EVs are really worth“, Reuters, 24 October 2023
3. „Why So Many Electric Car Chargers in America Don’t Work“, Bloomberg News, 18 May 2023
4. „FACT SHEET: Biden-⁠Harris Administration Announces New Standards and Major Progress for a Made-in-America National Network of Electric Vehicle Chargers“, The White House, 15 February 2024
5. „China’s EV charging problem: can providers deliver power where cars need it across the vast nation, and turn a profit?“, South China Morning Post, 28 October 2023
6. „The Secret Tesla Motors Master Plan (just between you and me)“, Tesla Website, 2 August 2006
7. „Exclusive: Tesla scraps low-cost car plans amid fierce Chinese EV competition“, Reuters, 6 April 2024
8. „Elon Musk announces Tesla will unveil a ‘robotaxi’ on August 8“, CNN, 5 April 2024