Tesla (NASDAQ: TSLA published a solid set of delivery numbers for Q3 2021 late last week, noting that it had delivered a record 241,300 vehicles for the quarter, a sequential increase of 20% and a year-over-year increase of almost 73%. The impressive numbers indicate that Tesla is able to overcome the considerable supply chain issues that are impacting the broader auto industry. For perspective, even Toyota, which has the most well-oiled supply chain in the automotive business, had to slash worldwide vehicle production by 40% in September on account of the global semiconductor shortage. So how did Tesla deliver despite the odds? We think there could be three broad reasons.
Firstly, Tesla focuses on more premium vehicles, and its automotive gross margins stood at almost 26% in Q2 2021, excluding regulatory credit sales, compared to margins of under 10% for the broader auto and truck space. This puts the company in a better position to secure supply, as semiconductor companies could prioritize higher value players. We’ve seen something similar in the consumer electronics space as well, with high-margin Apple managing its chip supply much better versus the broader industry.
The current chip shortage in the automotive space is largely due to the fact that semiconductor fabs have transitioned production capacity from tried and tested legacy chips used by automakers (often 40-nanometer process node and above) to more modern chipsets with more advanced process technologies. It’s possible that Tesla’s more modern vehicle architecture is helping it adapt to the current situation more quickly. Tesla’s solid software engineering capabilities are also helping. Over Q2 2021, Tesla said that it was able to source alternative chips and write out updated software for them in a matter of weeks to integrate them into its vehicles. This is probably something mass-market automakers can’t do so easily.
It’s also likely that Tesla’s Chinese business played a strong role in its deliveries for this quarter. EV sales in China have been booming, and it appears that Chinese players have had less trouble securing chip supply. For example, China’s premium EV players Nio and Li Auto posted 100% and 190% year-over-year growth respectively over Q3 2021. Tesla now has a big presence in China, with its Shanghai facility accounting for over 40% of its total current production capacity. This probably helped the company.
Tesla stock has largely held up despite the broader market sell-off over the last month, returning about 4%, compared to the S&P 500 which was down by close to 4%. So will Tesla stock rise further in the near-term or is a decline looking likely? Per the Trefis Machine learning engine, Tesla stock has a 61% chance of a rise over the next month. See our analysis Tesla Chance of Rise for more details.
That said, we value Tesla stock at just about $560 per share, a discount of almost 30% versus the current market price, due to mounting competition in the EV space from mainstream automakers and concerns of higher inflation and rising interest rates, which could hurt valuations for high-growth stocks. Check out our analysis on Tesla Valuation: Expensive Or Cheap
Tesla stock (NASDAQ:TSLA) declined by about 1.7% in Tuesday’s trading, compared to the Nasdaq-100 which fell by almost 3% due to rising bond yields and a decline in the U.S. consumer confidence index. Although Tesla has typically been more sensitive to market declines, being a high multiple, high growth stock, it has held up better through the current volatility. In fact, Tesla stock was also up by around 5% over the last week (five trading days) compared to the Nasdaq-100 which fell 2% over the same period. The stock is also up by about 9% over the last month. Tesla is slated to report deliveries for Q3 2021 in early October, and with the company fairly consistently creating new quarterly delivery records, investors are likely anticipating another strong quarter. Per a report in Electrek, Tesla CEO Elon Musk indicated to employees that September was likely to be the “craziest month of deliveries” for Tesla. For perspective, Tesla delivered a record 201,250 vehicles in Q2 2021, marking a sequential increase of 9%, and a year-over-year increase of about 130%.
Now, is Tesla stock poised to grow? Based on our machine learning analysis of trends in the stock price over the last ten years, there is a 63% chance of a rise in TSLA stock over the next month (twenty-one trading days). See our analysis on Tesla Chance of Rise for more details.
Five Days: TSLA 5.2%, vs. S&P 500 0.07%; Outperformed market
(26% Event Probability)
- Tesla stock rose 5.2 % over a five-day trading period ending 9/28/2021, compared to the broader market (S&P500) which remained roughly flat.
- A change of 5.2% or more over five trading days has a 26% event probability, which has occurred 663 times out of 2516 times in the last ten years.
Ten Days: TSLA 4.4%, vs. S&P 500 -2.3%; Outperformed market
(41% Event Probability)
- Tesla stock rose 4.4 % over a ten-day trading period ending 9/28/2021, compared to the broader market (S&P500) which declined by -2.3%
- A change of 4.4% or more over ten trading days has a 41% event probability, which has occurred 1024 times out of 2516 times in the last ten years.
Twenty-One Days: TSLA 9.2%, vs. S&P 500 -3.6%; Outperformed market
(35% Event Probability)
- Tesla stock rose 9.2 % over a twenty-one day trading period ending 9/28/2021, compared to the broader market (S&P500) which declined by -3.6%
- A change of 9.2% or more over twenty-one trading days has a 35% event probability, which has occurred 879 times out of 2515 times in the last ten years.
Looking for more details on Tesla’s valuation and financial performance in recent years? Check out our dashboards on Tesla Revenue and Tesla Valuation for more details.
[8/19/2021] How Will Tesla’s Autopilot Investigation Impact Its Stock?
Investors have been betting that Tesla’s (NASDAQ:TSLA) lead in self-driving technology – one of the most powerful trends in the auto market – will help it shape the future of transportation. However, the company’s popular driver-assistance feature, Autopilot, has come under increasing regulatory scrutiny this week, with the National Highway Traffic Safety and Administration (NHTSA) noting that it was looking into 11 cases of collisions of Tesla vehicles with parked vehicles of first responders. Moreover, two U.S. Senators have asked the U.S. Federal Trade Commission to investigate if Tesla’s naming of its driver-assistance systems “Autopilot” and “Full Self-Driving” were deceptive. Tesla stock declined by about 4% over the last three trading days, partly due to the news. So what do the recent developments mean for Tesla’s self-driving ambitions?
While the reported crashes are obviously concerning, safety-related incidents and investigations are part and parcel of the automotive business and we don’t see this as meaningfully altering the course of Tesla’s self-driving business. There is data that indicates that Tesla’s driver assistance systems actually make its cars safer. Tesla publishes vehicle safety reports every quarter, and based on its Q1 2021 data, it said that it registered one accident for every 4.19 million miles driven with Autopilot engaged, compared to one accident for every 2.05 million miles driven without Autopilot, but with the company’s other active safety features. Accident data compared over the last three years, in terms of total miles driven with Autopilot engaged, has also been on the decline. That said, Tesla’s current marketing might appear to make customers think that human oversight of the vehicle may not be necessary and this is probably an area that regulators could likely force the company to make changes to.
So what’s driving Tesla’s value?
It’s partly the improving fundamentals (better than expected Q1 results and Q2 deliveries, strong sales in China), but there has to be more. Investors are likely betting that the disruption caused by Covid-19 could solidify Tesla’s position as the leading electric and autonomous driving play – two separate, and perhaps the most powerful trends in the auto industry. At the same time, there are signs some mainstream automakers are slowing down their investments in the space while they navigate a collapse in sales and manage significant near-term financial pressures.
For instance, BMW and Mercedes-Benz announced that they will end their automated driving alliance, for now, citing current business and economic conditions, among other factors. Here’s the thing: the primary function of cars is to drive. Tesla’s focus on self-driving while some others are either backing out or showing lackluster progress, is akin to a small cereal manufacturer doubling down in the “sweet” category of breakfast cereals, while others say they’ve chosen to back out of it. Can you believe that?
It’s not even close: we lay out the numbers on how big could self-driving be, and contrast with others in our interactive dashboard analysis: Just How Far Ahead Is Tesla In The Self-Driving Race?
Miles logged are a crucial metric for autonomous cars, as self-driving algorithms are based on machine learning, and more training data makes algorithms smarter. Tesla continues to make solid progress on this front, reporting that its vehicles had logged a total of 3 billion miles on Autopilot as of April 2020 – up from a cumulative 1 billion miles it reported in late 2018. This is well ahead of its nearest rival, Waymo (backed by Alphabet), which reported that its test vehicles had logged 20 million miles on public roads as of January. While Waymo has been “testing”, Tesla is simply doing it! The strategy is simple yet bold: sell cars directly, add self-driving features with a whole bunch of warnings, and collect data while users use it. Shouldn’t Google buy Tesla or perhaps another carmaker and do the same? See how Tesla’s value could rise to $1.5 trillion aided by a deal with Google.
Tesla also appears to be more confident about the capabilities of its system. The company bumped up pricing for its full-self driving software upgrade from $7,000 to $8,000 starting July 1, and CEO Elon Musk has indicated that prices could only keep inching upward going forward as capabilities are added. Tesla is toying with the idea of offering its self-driving software as a subscription service – a move that could boost recurring revenue streams for the company while potentially increasing the adoption of the package.
Is this a good time to jump into Tesla stock? Yes – especially if you believe in this one important Tesla metric: Tesla’s time horizon. On the flip side, for a more balanced, risk-adjusted view see our analysis Tesla Valuation: Jump Into Tesla, Wait, Or Get Out?
Autonomous driving cars have emerged as a hot buzzword in the automotive industry over the last few years, with companies ranging from mainstream automakers such as General Motors to Silicon Valley startups such as Waymo (backed by Alphabet) looking to make a dent in the market. However, electric vehicle pioneer Tesla (NASDAQ: TSLA) appears to have a sizable early lead in this space both in terms of autonomous miles driven as well as monetization of its self-driving technology. Having delivered over 780k vehicles since its inception, most of which come with pre-installed self-driving capabilities that users can unlock by paying for software, the company has developed a meaningful self-driving business. In this analysis, we compare Tesla’s miles logged with rivals and size up the near-term revenue potential for its autonomous driving software.
Tesla Is Approaching 2 Billion Self-Driving Miles Driven
- Tesla’s total autonomous miles logged has grown exponentially from 0.1 billion in May 2016 to an estimated 1.88 billion as of October 2019.
- This is a crucial metric, as self-driving algorithms are based on machine learning, and more training data typically makes the algorithms smarter.
Tesla’s Log Of Autonomous Driving Data Is Orders Of Magnitude Higher Than Rivals
- Over 2018, Tesla likely logged about 500 million self-driving miles across all geographies.
- In comparison, rival autonomous driving tech companies Waymo and GM’s Cruise drove just 1.3 million and 447k miles, respectively, in California – their primary test market, which likely accounts for a bulk of their total miles logged.
Tesla’s Lead May Be Wider Still, As It Continuously Gathers Data From All Its Vehicles
- Tesla’s autonomous driving hardware is based on mature technology such as Radar, Ultrasonic, and Passive video, which is cheaper than some rivals who use LIDAR – a laser-based system.
- This enables the company to equip the hardware as standard in all its vehicles, irrespective of whether or not a user enables it by paying money.
- As the company’s vehicles are estimated to have driven over 16.8 billion miles in total thus far, this could be further enhancing Tesla’s log of driving data.
Tesla Is Likely To Make Over $1.5 Billion This Year From Self-Driving Software Sales
For more details on Tesla’s self-driving software sales, view our interactive dashboard analysis.
Trefis is an interactive financial community structured around trends, forecasts and insights related to some of the most popular stocks in the US. Whereas most finance sites simply give you the facts about where a stock has been and what a company has done in the past, Trefis focuses entirely on the future.