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Tesla Model 3 to remain unchallenged in 2020, predicts analyst

(Photo: Tesla)

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With the adoption of electric vehicles underway, and with more and more veteran automakers dipping their toes in electric cars, EVs like the Tesla Model 3 are bound to see some competition. This would be notable in coming years, with vehicles like Volvo’s Polestar 2 expected to enter the market as early as 2020. Despite this influx of EVs, Tesla (NASDAQ:TSLA) bull and Loup Ventures Managing Partner Gene Munster argues that the Model 3 will likely remain unchallenged. 

Currently, there are 17 EVs available in the US market. This is a notable increase from 2018, when there were only 11 that were available for purchase. By next year, there will likely be 24 all-electric cars that buyers could choose from. Munster argues that the majority of these vehicles could be divided into two categories: those that are priced above $70,000 and those that have a rated range below 130 miles. All of these, including the highly-anticipated Rivian R1S (which starts at the ~$70,000 range) or the Mini EV (which has a range of 135 miles), are not mainstream vehicles due to their cost or limited range. 

Available electric vehicles in the US in 2019. (Credit: Loup Ventures)

For an EV to be truly mainstream, Munster noted that the vehicle must be priced below $40,000 and have a range above 225 miles per charge. Only five electric cars in the US today meet this criterion: The Tesla Model 3 Standard Range Plus, the Chevy Bolt EV and the Volt, the Hyundai Kona Electric, and the Kia e-Niro. Munster noted that among these options, the Tesla Model 3 is the “clear winner in terms of value,” and this is something that would likely continue to the coming year. Even with the upcoming competition in 2020, the Model 3 will likely be “unchallenged in its EV value proposition,” the analyst wrote.  

Tesla’s year-to-date EV market share stands at a dominating 75%. According to Munster, he expects this to decline to about 20-25% over the next ten years. Provided that the US auto sales stabilize at around 18 million per year, and provided that electric car adoption becomes widespread, Tesla’s sales in the country could end up yielding around 3.6-4.5 million vehicles per year. This is notable growth, considering that Tesla is expected to deliver just over 200,000 vehicles in the US this year, as part of its estimated 360,000 global deliveries in 2019. 

Expected new electric vehicles in 2020. (Credit: Loup Ventures)

A key factor in this expected continued dominance is Tesla’s increasingly apparent 7-year headstart in the electric vehicle market. Munster argues that this headstart allows Tesla to enjoy a lead against its competitors in terms of batteries that are more efficient compared to other EV manufacturers, a vertically integrated Supercharger Network that’s easier to use compared to third-party charging stations, and dedicated full self-driving capabilities that are specifically tuned for the company’s vehicle lineup. These factors complete the Tesla ownership ecosystem, and all of these are present in the electric car maker’s entry-level offering, the Model 3 Standard Range Plus. 

The narrative of Tesla’s upcoming competition has proven prevalent over the past years, with critics of the company dubbing electric cars such as the Jaguar I-PACE, the Audi e-tron, and the Chevy Bolt EV as potential “Tesla Killers.” As vehicles like the Model 3 continue to prove that Tesla is a moving target, and as companies like Jaguar and Audi exhibit teething problems with the I-PACE and e-tron, the gap between Tesla and its rival automakers continues to become more pronounced.

Disclosure: I have no ownership in shares of TSLA and have no plans to initiate any positions within 72 hours.

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Simon is an experienced automotive reporter with a passion for electric cars and clean energy. Fascinated by the world envisioned by Elon Musk, he hopes to make it to Mars (at least as a tourist) someday. For stories or tips--or even to just say a simple hello--send a message to his email, simon@teslarati.com or his handle on X, @ResidentSponge.

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Investor's Corner

xAI targets $5 billion debt offering to fuel company goals

Elon Musk’s xAI is targeting a $5B debt raise, led by Morgan Stanley, to scale its artificial intelligence efforts.

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(Credit: xAI)

xAI’s $5 billion debt offering, marketed by Morgan Stanley, underscores Elon Musk’s ambitious plans to expand the artificial intelligence venture. The xAI package comprises bonds and two loans, highlighting the company’s strategic push to fuel its artificial intelligence development.

Last week, Morgan Stanley began pitching a floating-rate term loan B at 97 cents on the dollar with a variable interest rate of 700 basis points over the SOFR benchmark, one source said. A second option offers a fixed-rate loan and bonds at 12%, with terms contingent on investor appetite. This “best efforts” transaction, where the debt size hinges on demand, reflects cautious lending in an uncertain economic climate.

According to Reuters sources, Morgan Stanley will not guarantee the issue volume or commit its own capital in the xAI deal, marking a shift from past commitments. The change in approach stems from lessons learned during Musk’s 2022 X acquisition when Morgan Stanley and six other banks held $13 billion in debt for over two years.

Morgan Stanley and the six other banks backing Musk’s X acquisition could only dispose of that debt earlier this year. They capitalized on X’s improved operating performance over the previous two quarters as traffic on the platform increased engagement around the U.S. presidential elections. This time, Morgan Stanley’s prudent strategy mitigates similar risks.

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Beyond debt, xAI is in talks to raise $20 billion in equity, potentially valuing the company between $120 billion and $200 billion, sources said. In April, Musk hinted at a significant valuation adjustment for xAI, stating he was looking to put a “proper value” on xAI during an investor call.

As xAI pursues this $5 billion debt offering, its financial strategy positions it to lead the AI revolution, blending innovation with market opportunity.

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Tesla tops Cathie Wood’s stock picks, predicts $2,600 surge

Tesla’s future lies beyond cars—with robotaxis, humanoid bots & AI-driven factories. Cathie Wood predicts a 9x surge in 5 years.

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Cathie Wood shared that Tesla is her top stock pick. During Steven Bartlett’s podcast “The Diary Of A CEO,” the Ark Invest founder highlighted Tesla’s innovative edge, citing its convergence of robotics, energy storage, and AI.

“Because think about it. It is a convergence among three of our major platforms. So, robots, energy storage, AI,” Wood said of Tesla. She emphasized the company’s potential beyond its current offerings, particularly with its Optimus robots.

“And it’s not stopping with robotaxis; there’s a story beyond that with humanoid robots, and our $2,600 number has nothing for humanoid robots. We just thought it’d be an investment, period,” she added.

In June 2024, Ark Invest issued a $2,600 price target for Tesla, which Wood reaffirmed in a March Bloomberg interview, projecting the stock to reach this level within five years. She told Bartlett that Tesla’s Optimus robots would drive productivity gains and create new revenue streams.

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Elon Musk echoed Wood’s optimism in a CNBC interview last month.

“We expect to have thousands of Optimus robots working in Tesla factories by the end of this year, beginning this fall. And we expect to scale Optimus up faster than any product, I think, in history to get to millions of units per year as soon as possible,” Musk said.

Tesla’s stock has faced volatility lately, hitting a peak closing price of $479 in December after President Donald Trump’s election win. However, Musk’s involvement with the White House DOGE office triggered protests and boycotts, contributing to a stock decline of over 40% from mid-December highs by March.

The volatility in Tesla stock alarmed investors, who urged Musk to refocus on the company. In a May earnings call, Musk responded, stating he would be “scaling down his involvement with DOGE to focus on Tesla.” Through it all, Cathie Wood and Ark Invest maintained their faith in Tesla. Wood, in particular, predicted that the “brand damage” Tesla experienced earlier this year would not be long term.

Despite recent fluctuations, Wood’s confidence in Tesla underscores its potential to redefine industries through AI and robotics. As Musk shifts his focus back to Tesla, the company’s advancements in Optimus and other innovations could drive it toward Wood’s ambitious $2,600 target, positioning Tesla as a leader in the evolving tech landscape.

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Investor's Corner

Goldman Sachs reduces Tesla price target to $285

Despite Goldman Sach’s NASDAQ: TSLA price cut to $285, Tesla boasts $95.7B in revenue & nearly $1T market cap.

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tesla-model-y-giga-berlin-delivery
(Credit: Tesla)

Goldman Sachs analysts cut Tesla’s price target to $285 from $295, maintaining a Neutral rating.

The adjustment reflects weaker sales performance across key markets, with Tesla shares trading at $284.70, down nearly 18% in the past week. The analysts pointed to declining sales data in the United States, Europe, and China as the primary driver for the revised outlook. In the U.S., Tesla’s quarter-to-date deliveries through May fell mid-teens year-over-year, according to Wards and Motor Intelligence.

In Europe, April registrations plummeted 50% year-over-year, with May showing a mid-20% decline, per industry data. Meanwhile, the China Passenger Car Association (CPCA) reported a 20% year-over-year drop in May, despite a 5.5% sequential increase from April. Consumer surveys from HundredX and Morning Consult also shaped Goldman Sachs’ lowered delivery and EPS forecasts.

Goldman Sachs now projects Tesla’s second-quarter deliveries to range between 335,000 and 395,000 vehicles, with a base case of 365,000, down from a prior estimate of 410,000 and below the Visible Alpha Consensus of 417,000. Despite these headwinds, Tesla’s financials remain strong, with $95.7 billion in trailing twelve-month revenue and a $917 billion market capitalization.

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Regionally, Tesla’s challenges are stark. In Germany, the German road traffic agency KBA reported Tesla’s May sales dropped 36.2% year-over-year, despite a 44.9% surge in overall electric vehicle registrations. Tesla’s sales fell 29% last month in Spain, according to the ANFAC industry group. These declines highlight shifting consumer preferences amid growing competition.

On a positive note, Tesla is making strategic moves. The Model 3 and Model Y are part of a Chinese government campaign to boost rural sales, potentially mitigating losses. Piper Sandler analysts reiterated an Overweight rating, emphasizing Tesla’s supply chain strategy.

Alexander Potter stated, “Thanks to vertical integration, Tesla is the only car company that is trying to source batteries, at scale, without relying on China.”

As Tesla navigates these delivery challenges, its focus on innovation and supply chain resilience could help it maintain its edge in the electric vehicle market despite short-term hurdles.

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