Tesla’s Slow Sales Growth and Production Challenges for New Model

Summary

Tesla (NASDAQ:) has been noted to face a numerous challenges in the ramping up of production for its new model, causing its shares to plunge 6.5% in pre-market trading. The electronic car manufacturer has warned of a significant slowdown in sales this year, boosted by the new car model’s release which requires ‘revolutionary manufacturing technology’. Elon Musk, Tesla’s trailblazer, anticipates the commencement of production to be in the second half of 2025. Analyst estimates place Tesla sales at 2.2 million vehicles for this year, a decent increase from the previous year but nowhere near Musk’s ambitious goal. Musk has hinted at the possibility of more price cuts in response to weaker demand for its electric cars.

Tesla Preparing for Slower Growth and Tightening Competition

Tesla is gearing up for a slowdown in growth coupled with narrowed profit margins as the demand for electric vehicles (EVs) shows signs of softening and competition increases. Furthermore, Gary Bradshaw of Hodges Capital Management predicts Tesla may cut its prices to gain market share, despite potential struggles with the margins.

Tesla’s Warning

Tesla warned regarding lower sales growth in the current year as its focus shifts towards the new vehicle model, due to shrinkage in fourth-quarter gross margin. Tesla finds itself poised between two growth phases, of which one was instigated by the release of Models 3 and Y in 2017 and 2020, and the other to be propelled by the new-generation vehicle platform.

Tesla’s Link to the Forex World

Tesla’s stocks fluctuations can produce tremors in the forex industry, mainly due to the yen and dollar’s implicit relationship. The repercussion in forex could also influence the attractiveness of certain assets.

Elon Musk’s Optimism

Elon Musk remains hopeful about time frames, indicating the planned commencement of production towards late 2025. The new model is set to be first manufactured in Tesla’s Texas factory, followed by facilities in Mexico and another non-North American factory, to be decided later in the year.

The Impact on Tesla’s Gross Margin

The auto giant reported gross margins of 17.6% for the period ending December, compared to the 23.8% recorded a year earlier. Margins from automotive trade, excluding regulatory credits, fell to 17.2% from 24.3% a year ago, despite improvement from 16.3% in the preceding quarter. Tesla also cautioned it is nearing “the natural limit of cost down of our existing vehicle lineup.

This potential reduction in Tesla’s sales volume and margins could have significant impacts on the forex and trading industries, potentially affecting the yen and dollar dynamics. Watching Tesla’s next steps will be pivotal for investors and sector analysts.

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