Tesla’s Q2 2023 vehicle deliveries have exceeded expectations, despite a year-over-year decline. The electric vehicle giant reported a remarkable 83% increase in deliveries, reaching 466,140 units. This surge can be attributed to several factors, including a favorable comparison with Q2 2022, when Tesla’s Chinese operations were significantly impacted by strict Covid-19 lockdowns. Additionally, Tesla’s strategic price cuts on popular models and the expansion of its manufacturing capacity have played crucial roles in boosting deliveries.
Tesla has implemented multiple price reductions over the past two quarters, making its vehicles more accessible to a broader customer base. For instance, the Model Y is now selling at more than 20% below last year’s prices. Furthermore, the Model 3 and Model Y are eligible for a $7,500 tax credit under the Inflation Reduction Act in the U.S., further enhancing their affordability. The ramp-up of production at Tesla’s Texas factory has also contributed to the increased supply of vehicles.
With the Q2 delivery numbers, Tesla’s total deliveries for the first half of 2023 stand at approximately 889,000 units. If this momentum continues, the company is on track to achieve its ambitious target of 2 million deliveries for the year. This would also position Tesla to meet its long-term compounded growth rate target of 50%.
Despite the strong delivery numbers, there are mixed opinions on whether Tesla stock is a buy. While Tesla is expected to remain a significant player in the long-term transition to electric vehicles, thanks to its efficient supply chain, superior electric drivetrains, and leadership in software and self-driving technology, some analysts are cautious. Currently, Tesla stock is trading at around $262 per share, which is about 75 times forward consensus earnings. This valuation is considered slightly high by some experts, who have set a price estimate of $210, approximately 20% below the current market price.
Tesla’s earnings for 2023 are projected to decline year-over-year due to contracting automotive margins resulting from the price cuts. For instance, in Q1 2023, gross margins stood at 19.3%, down nearly 10% compared to the same period last year. This decline in margins has raised concerns among investors and analysts.
The broader electric vehicle market has also seen significant growth. Nearly one in five cars sold in 2023 was electric, with global electric car sales nearing 14 million units. This represents a 35% year-on-year increase, with 95% of these sales occurring in China, Europe, and the United States. The total number of electric cars on the road has now reached 40 million, closely tracking the sales forecast from the 2023 edition of the Global EV Outlook.
In China, electric car sales reached 8.1 million units in 2023, a 35% increase compared to 2022. This growth was a key driver for the overall car market, which saw a contraction in conventional internal combustion engine car sales but a 5% increase in total car sales. The year 2023 marked the first time China’s New Energy Vehicle (NEV) industry operated without national subsidies for EV purchases, although tax exemptions and non-financial support remain in place.
In the United States, new electric car registrations totaled 1.4 million in 2023, a more than 40% increase compared to 2022. The revised qualifications for the Clean Vehicle Tax Credit and electric car price cuts have made some popular EV models eligible for credit, boosting sales. For example, sales of the Tesla Model Y increased by 50% compared to 2022 after it became eligible for the full $7,500 tax credit.
In Europe, new electric car registrations reached nearly 3.2 million in 2023, a 20% increase compared to 2022. Germany became the third country, after China and the United States, to record half a million new battery electric car registrations in a single year. However, the phase-out of several purchase subsidies in Germany slowed overall EV sales growth.
Emerging markets are also seeing an increase in electric car sales, albeit from a low base. In India, electric car registrations were up 70% year-on-year to 80,000 units, driven by purchase incentives and new popular models. In Thailand, electric car registrations more than quadrupled to nearly 90,000 units, reaching a 10% sales share. In Vietnam, electric car sales grew from under 100 units in 2021 to over 30,000 units in 2023, reaching a 15% sales share.
In Latin America, electric car sales reached almost 90,000 units in 2023, with Brazil leading the region. Electric car registrations in Brazil nearly tripled year-on-year to more than 50,000 units, driven by the entry of Chinese carmakers and the launch of the Green Mobility and Innovation Programme.
Overall, the global electric vehicle market continues to grow robustly, with strong sales in major markets and increasing adoption in emerging markets. Tesla’s impressive Q2 2023 delivery numbers highlight the company’s resilience and ability to capitalize on the growing demand for electric vehicles, despite challenges such as price cuts and contracting margins.
Source: Anadolu Agency, Trefis
