Looking solely at recent headlines could lead one to feel optimistic about the struggling Tesla (NASDAQ: TSLA) stock. After experiencing a 30% drop from its December highs—primarily due to losing its top position to the battery-electric vehicle (BEV) competitor BYD Company (OTC: BYDDY)—Tesla has now regained its lead.
However, there’s more to consider. The deeper you analyze, the less attractive Tesla’s stock appears.
After months of being outpaced by BYD in total BEV production, Tesla managed to deliver 358,023 EVs in the first quarter, while BYD sold 310,389. This seems like a significant achievement for Tesla shareholders, but it tells only part of the story.
Importantly, Tesla’s deliveries fell short of the analysts’ target of 365,645 vehicles for the quarter. Furthermore, BYD’s count does not include its 378,604 hybrid vehicle sales, a category Tesla does not compete in, which could skew the true comparison.
Moreover, Tesla is gradually losing overall market share, particularly in Europe, falling behind BYD. While losing market share in a growing EV sector isn’t necessarily a catastrophe, it signals a problem that many investors aren’t used to: Tesla’s decreasing pricing power due to intense competition. The company’s adjusted EBITDA margins have declined from nearly 24% in 2022 to below 16% last year, leaving investors puzzled about how to value the company in this new environment.
Additionally, rather than focusing on creating more competitively priced cars with better margins, Tesla CEO Elon Musk seems to be directing attention towards developing humanoid robots for household tasks. Musk claims these robots could be commercially priced at under $30,000, with production possibly starting by the end of next year.
While there’s potential for these innovations, Musk’s history of unmet promises raises questions about timelines. The successful launch of autonomous robots and competitive self-driving taxis could certainly revolutionize the market. However, investors need more than just a positive quarter in EV sales to be convinced. Competitors will continue to emerge and improve, enhancing their challenge against Tesla and BYD.
