Summary
- Tesla facing challenges transitioning to producing Model Y
- Production loss of 100,000 vehicles predicted due to shift in manufacturing
- Analyst predicts sustained pressure on Tesla’s gross margins
- Forecast for Tesla’s 2025 EPS lowered by Bank of America analyst
- Analyst remains cautious with Neutral rating and $490 price target for Tesla shares
Article
Bank of America analyst John Murphy acknowledges that Tesla is facing short-term challenges as it transitions to producing its new Model Y vehicle. This shift will involve updating all factories simultaneously, resulting in a loss of production and impacting margins. Murphy predicts a production loss of 100,000 vehicles and believes Tesla will continue to face pressure to prioritize volume growth. There is also uncertainty surrounding Tesla’s outlook for 2025, as it may not meet Elon Musk’s previous prediction of 20-30% volume growth by this year.
In addition to the shift in Model Y production, Murphy forecasts that declining average selling prices, attractive leasing terms, and various incentives could further pressure Tesla’s gross margins. As a result, he has lowered his 2025 EPS prediction for Tesla from $3.15 to $3.05 and maintains a cautious stance with a Neutral rating and a $490 price target for Tesla shares. Despite these challenges, Murphy acknowledges that Tesla has the potential for gains in the long run but will have to navigate through some short-term pain along the way.
Tesla’s Chief Financial Officer, Vaibhav Taneja, highlighted the challenges the company faces in transitioning to producing the new Model Y. While confident in the team’s abilities to ramp up production quickly, Taneja noted that this changeover will result in several weeks of lost production in the quarter. Despite the impact on margins due to idle capacity and ramp-related costs, Taneja believes that these challenges will be overcome as production is ramped up.
The Teslarati team invites readers to share their tips and insights on Tesla’s current situation. If you have any information to provide or suggestions for the team, you can contact them via email at maria@teslarati.com or through Twitter @Writer_01001101. It is clear that Tesla is facing some obstacles in the short term, but with careful navigation and strategic planning, the company has the potential to achieve long-term gains. By addressing these challenges head-on and adapting to the changing market dynamics, Tesla can position itself for future success despite the current uncertainties.
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