Key Takeaways

As U.S. EV sales hit a quarterly record, reports say Tesla’s price cuts aren’t protecting its domestic market share—investors will want to hear more 

As UAW strikes spread, EV vehicle and battery production talks are sharing equal spotlight with pay and benefits—what that could mean for all EV pricing 

How ‘instant’ EV tax credits in ’24 could affect industry sales 

Despite a more than 130% year-to-date share price gain as of Tuesday, Tesla (TSLA) and its CEO Elon Musk may face Wednesday afternoon’s third-quarter (Q3) earnings call with new questions about how dominant the world’s largest electric vehicle (EV) manufacturer can continue to be.

As of Monday, analysts were already projecting TSLA’s Q3 earnings per share to fall nearly 30% from year-ago levels despite a 10% projected gain in revenues. This is due in large part to the Austin, Texas-based automaker’s average 25% across-the-board price cuts this year. Bloomberg said such cuts have finally placed Tesla’s Model Y nearly $4,000 below the U.S. average car price of $48,000.

However, a report last Thursday from Cox Automotive suggested Tesla’s aggressive move toward EV-to-gas parity could be coming at a high price. Despite the price cuts, Tesla appears to be in reverse on its U.S. market share.

Citing Kelley Blue Book figures, Cox said that while Q3 nationwide EV sales hit 313,086 cars—up more than 49% from a year ago—Tesla’s market share is eroding fast. Back in Q1, the company’s share of the U.S. EV market share stood at nearly 62%. As of October 12, it stood at 50%, “the lowest level on record.”

At the same time, competitors are clearly speeding up. Cox pointed out that 14 new EV models on the market today were not for sale a year ago—including General Motors’ (GM) new EV versions of its Chevrolet Blazer SUV and Silverado truck. Cox noted that in the luxury U.S. EV market, German makers Audi, BMW, and Mercedes were making significant gains, with Audi alone recording 94% of EV sales growth in Q3. 

What could change that particular narrative for TSLA? Investors should tune in to hear what Musk and other executives have to say about reports of TSLA’s declining U.S. market share.

And another potential question—so far, there’s been no official sale date announced for Tesla’s long-awaited Cybertruck that finally rolled off the line last quarter. Tesla’s  been taking orders for it since 2021. When will you be able to buy one at your local dealer?

Meanwhile, back in Detroit

Investors may also  wonder how the United Auto Workers (UAW) strike could affect global EV manufacturing. In September, UAW took the unusual step of striking at plants run by GM, Ford (F), and Stellantis (STLA) all at once, a historic departure from selecting one automaker to negotiate a “model” contract that would set pay, benefits, and work rules for all UAW employers.

Pay gains are clearly one goal, but job protections during the coming EV auto conversion are certainly another.

So far, GM alone has agreed to bring workers at battery factories into its UAW national contract. Should Ford and Stellantis eventually follow suit, investors may want to listen for Tesla’s overall point of view on how that might affect EV pricing and production costs against nonunion manufacturers like TSLA, Rivian Automotive (RIVN), and others.  

Will instant tax credits in ’24 pay off?

Investors might also want to hear the potential impact of the just-announced “instant” U.S. EV tax credits set to start next year. Instead of filing a tax return to get a credit of up to $7,500 on a new EV (up to $4,000 on used), qualified buyers will be able to take it off the purchase price at the dealership. The question is whether this might spark more sales.

Congress made additional changes to the federal EV tax credit through the 2022 Inflation Reduction Act, and the U.S. Treasury Department announced on October 6 that the credit could be used as a point-of-sale rebate starting January 1 next year.

Though experts have advised car buyers to consult their tax professional on whether to buy now or wait, investors might wonder if any purchase delay related to the credit could slow EV sales through Q4.

Dates to mark on your calendar

Tesla gets most of the headlines, but it’s not the only EV company with earnings on the way.

Rivian, known for its R1T pickup truck model, recently reported Q3 deliveries that were ahead of expectations for the third quarter in a row. Analysts expect a narrower third-quarter loss per share of $1.33 compared to a year ago. The company is scheduled to report results November 7. Consensus on Q3 revenues is now at $1.31 billion, up from $551.6 million a year ago.

Lucid Group (LCID) has faced problems all year meeting delivery goals for its line of luxury vehicles, and confirmed today it had delivered 1,457 vehicles in Q3, short of analysts’ 2,000-car expectations.  Analyst consensus has the carmaker’s loss per share widening to $0.36 from the year-ago loss of $0.24, and Bloomberg recently reported analysts’ average full-year 2023 sales estimate has dropped nearly 50% over the past six months. The firm is expected to announce Q3 results on November 14. 

PASSING GO. As of Tuesday, the Dow Jones U.S. Automobiles Index ($DJUSAU—candles) was up more than 98% for the year, with Tesla (TSLA—pink line) at a more than 130% gain year to date after 2022’s nearly 70% slide in value. Rivian (RIVN—blue line), has closed three consecutive quarters of deliveries above expectations, though Lucid Group (LCID—orange line) is still struggling to find the upside after missing both Q2 top- and bottom-line estimates in August. Data source: S&P Dow Jones indices. Chart source: thinkorswim® platform. For illustrative purposes only. Past performance does not guarantee future results.

What else to listen for

One thing about a Tesla earnings call—it’s rarely dull in terms of numbers or topics. Besides more detail on the above, investors may want to listen for the following:

How’s the economy? Recession talk isn’t as tough as it was the last two quarters, but how’s the consumer? Rates are still high, revolving debt is up, and savings are down—but maybe that’s never affected Tesla’s core customer all that much.How’s China? The Wall Street Journal reported earlier this month that China-based EV maker BYD made more cars than Tesla during the third quarter with an in-house battery business keeping costs low. What will that mean for Tesla’s overseas markets?Will demand save margins? Did Tesla bet correctly with its aggressive price cuts to meet a more EV-friendly car market in 2024? Or will the company have to try new tactics—like advertising, perhaps—to get numbers even higher?Charging ahead? In the past week, both Hyundai and Kia confirmed that they’ll adopt Tesla’s North American Charging Standard (NACS) in Q4 of 2024. Other automakers who have adopted NACS include Ford, GM, and Rivian but not Volkswagen or Toyota (TM). Tesla might be asked how this works into revenue projections and whether it plans to expand its network to meet this growing demand.How goes battery, solar and AI? Tesla is in all these businesses—listen for the latest updates.

And of course, there’s Cybertruck. 

Happy trading,

Alex

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