Investor's Corner
Tesla Model 3 recognized as the United States’ best-selling luxury car in 2018
The Tesla might still have a number of critics who question the vehicle’s demand, but the electric sedan has practically dominated in 2018 nonetheless. By selling a total of 145,846 units over the course of the past year, the Model 3 has established itself as the United States’ best-selling luxury vehicle, far outpacing its closest competitor.
After the Tesla Model 3, the second in the past year’s luxury vehicle rankings is the Lexus RX, which sold 111,641 units in 2018. Following the Toyota-made Lexus RX are more luxury SUVs from legacy carmakers from Germany, such as the Mercedes-Benz GLC, which sold 62,435 units, and the Audi Q5, which sold 61,835 over the year, as noted in a report from CNBC Make It.
The Model 3’s place at the top of the US’ luxury vehicles list is a notable feat for the electric sedan, especially considering Tesla’s challenges with the vehicle’s production ramp. In the first quarter of 2018, for example, Tesla was only able to produce 9,766 Model 3. During this time, Tesla was struggling to hit a milestone of producing 2,500 Model 3 per week.
After adopting unorthodox strategies such as the construction of another assembly line inside a massive sprung structure on the grounds of the Fremont factory, Tesla’s second quarter proved to be an improvement over Q1, with the company producing 28,578 Model 3 from April to June 2018. Q2 was also the first time production of the Model 3 exceeded the numbers of the Model S and X.
Tesla’s breakthrough with Model 3 production came in the third quarter when the company doubled its Q2 volume and produced 53,239 units of the vehicle. Despite what Elon Musk described as “delivery logistics hell,” Tesla was able to deliver a total of 55,840 Model 3 to customers before the quarter ended. These efforts ultimately allowed Tesla to surprise Wall Street and prove its naysayers wrong by posting $6.8 billion in revenue and beating earnings estimates with a GAAP profit of $312 million.
The Model 3 continued to be produced in mass quantities in the fourth quarter, with the company producing 61,394 Model 3. Deliveries for the vehicle also hit 63,150 in Q4, signifying a 13% growth over the vehicle’s already impressive figures in Q3 2018. Over the course of the year, Tesla ultimately delivered a total of 245,240 vehicles, 145,846 of them being the Model 3. That’s nearly as many cars the company sold in all previous years combined.
Inasmuch as the Model 3 is already being recognized as a success in the US luxury car market, the electric sedan is yet to start its push into international markets. So far, Tesla is already laying the foundations for the Model 3’s push in two large global markets — Europe and China. The company is reportedly looking to send 3,000 Model 3 per week to Europe by February. To prepare for the influx of Model 3, Tesla has begun rolling out Superchargers that are equipped with both a Type 2 and a CCS plug, which matches the port on Model 3 that are produced for the region.
Elon Musk has noted that deliveries of the Model 3 could begin as early as March in China. This, however, is but the tip of the iceberg for the company’s plans for the Model 3 in the country. Earlier this week, Elon Musk attended the groundbreaking event for Gigafactory 3, which will be tasked to produce affordable versions of the Model 3 and the Model Y for the Chinese market. In true Tesla fashion, the company has an aggressive timetable for the upcoming factory, with Musk stating that the first China-made Model 3 could roll out of Gigafactory 3 by the end of 2019.
Elon Musk
Tesla locks in Elon Musk’s top problem solver as it enters its most ambitious era
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla has granted Senior Vice President of Automotive Tom Zhu more than 520,000 stock options, tying a significant portion of his compensation to the company’s long-term performance.
The generous equity award was disclosed by the electric vehicle maker in a recent regulatory filing.
Tesla secures top talent
According to a Form 4 filing with the U.S. Securities and Exchange Commission, Tom Zhu received 520,021 stock options with an exercise price of $435.80 per share. Since the award will not fully vest until March 5, 2031, Zhu must remain at Tesla for more than five years to realize the award’s full benefit.
Considering that Tesla shares are currently trading at around the $445 to $450 per share level, Zhu will really only see gains in his equity award if Tesla’s stock price sees a notable rise over the years, as noted in a Sina Finance report.
Still, even at today’s prices, Zhu’s stock award is already worth over $230 million. If Tesla reaches the market cap targets set forth in Elon Musk’s 2025 CEO Performance Award, Zhu would become a billionaire from this equity award alone.
Tesla’s problem solver
Zhu joined Tesla in April 2014 and initially led the company’s Supercharger rollout in China. Later that year, he assumed the leadership of Tesla’s China business, where he played a central role in Tesla’s localization efforts, including expanding retail and service networks, and later, overseeing the development of Gigafactory Shanghai.
Zhu’s efforts helped transform China into one of Tesla’s most important markets and production hubs. In 2023, Tesla promoted Zhu to Senior Vice President of Automotive, placing him among the company’s core global executives and expanding his influence beyond China. He has since garnered a reputation as the company’s problem solver, being tapped by Elon Musk to help ramp Giga Texas’s vehicle production.
With this in mind, Tesla’s recent filing seems to suggest that the company is locking in its top talent as it enters its newest, most ambitious era to date. As could be seen in the targets of Elon Musk’s 2025 pay package, Tesla is now aiming to be the world’s largest company by market cap, and it is aiming to achieve production levels that are unheard of. Zhu’s talents would definitely be of use in this stage of the company’s growth.
Tesla analyst Andrew Percoco of Morgan Stanley teased the company’s dominance in its self-driving initiative, stating that its lead over competitors is “not even close.”
Percoco recently overtook coverage of Tesla stock from Adam Jonas, who had covered the company at Morgan Stanley for years. Percoco is handling Tesla now that Jonas is covering embodied AI stocks and no longer automotive.
His first move after grabbing coverage was to adjust the price target from $410 to $425, as well as the rating from ‘Overweight’ to ‘Equal Weight.’
Percoco’s new note regarding Tesla highlights the company’s extensive lead in self-driving and autonomy projects, something that it has plenty of competition in, but has established its prowess over the past few years.
He writes:
“It’s not even close. Tesla continues to lead in autonomous driving, even as Nvidia rolls out new technology aimed at helping other automakers build driverless systems.”
Percoco’s main point regarding Tesla’s advantage is the company’s ability to collect large amounts of training data through its massive fleet, as millions of cars are driving throughout the world and gathering millions of miles of vehicle behavior on the road.
This is the main point that Percoco makes regarding Tesla’s lead in the entire autonomy sector: data is King, and Tesla has the most of it.
One big story that has hit the news over the past week is that of NVIDIA and its own self-driving suite, called Alpamayo. NVIDIA launched this open-source AI program last week, but it differs from Tesla’s in a significant fashion, especially from a hardware perspective, as it plans to use a combination of LiDAR, Radar, and Vision (Cameras) to operate.
Percoco said that NVIDIA’s announcement does not impact Morgan Stanley’s long-term opinions on Tesla and its strength or prowess in self-driving.
NVIDIA CEO Jensen Huang commends Tesla’s Elon Musk for early belief
And, for what it’s worth, NVIDIA CEO Jensen Huang even said some remarkable things about Tesla following the launch of Alpamayo:
“I think the Tesla stack is the most advanced autonomous vehicle stack in the world. I’m fairly certain they were already using end-to-end AI. Whether their AI did reasoning or not is somewhat secondary to that first part.”
Percoco reiterated both the $425 price target and the ‘Equal Weight’ rating on Tesla shares.
Tesla stock (NASDAQ: TSLA) just got a price target boost from its biggest bear, Gordon Johnson of GLJ Research, who raised his expected trading level to one that is 95 percent lower than its current trading level.
Johnson pushed his Tesla price target from $19.05 to $25.28 on Wednesday, while maintaining the ‘Sell’ rating that has been present on the stock for a long time. GLJ has largely been recognized as the biggest skeptic of Elon Musk’s company, being particularly critical of the automotive side of things.
Tesla has routinely been called out by Johnson for negative delivery growth, what he calls “weakening demand,” and price cuts that have occurred in past years, all pointing to them as desperate measures to sell its cars.
Johnson has also said that Tesla is extremely overvalued and is too reliant on regulatory credits for profitability. Other analysts on the bullish side recognize Tesla as a company that is bigger than just its automotive side.
Many believe it is a leader in autonomous driving, like Dan Ives of Wedbush, who believes Tesla will have a widely successful 2026, especially if it can come through on its targets and schedules for Robotaxi and Cybercab.
Justifying the price target this week, Johnson said that the revised valuation is based on “reality rather than narrative.” Tesla has been noted by other analysts and financial experts as a stock that trades on narrative, something Johnson obviously disagrees with.
Dan Nathan, a notorious skeptic of the stock, turned bullish late last year, recognizing the company’s shares trade on “technicals and sentiment.” He said, “From a trading perspective, it looks very interesting.”
Tesla bear turns bullish for two reasons as stock continues boost
Johnson has remained very consistent with this sentiment regarding Tesla and his beliefs regarding its true valuation, and has never shied away from putting his true thoughts out there.
Tesla shares closed at $431.40 today, about 95 percent above where Johnson’s new price target lies.
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