Elon Musk and Tesla power through regulatory, demand challenges

Tesla Inc. and its outspoken CEO Elon Musk made their earnings calls this week in a precarious situation.

Electric car makers slashed prices across their lineups by up to 20% in mid-January amid softening global demand and rising inventories. New revelations claimed that Tesla faked a video promoting its driver assistance software. And Musk faced his own legal troubles just before the call.

Earlier this week, Musk testified in a shareholder lawsuit alleging he misled investors by posting on Twitter in 2018 that he secured funds to take Tesla private. The deal never happened.

Separately, testimony earlier this month by a Tesla engineer came to light claiming the automaker staged a 2016 video to promote its Autopilot driver-assistance software, which is at the center of regulatory investigations.

Nonetheless, Tesla and Musk came out largely unscathed on Wednesday’s fourth-quarter earnings call after beating fourth-quarter financial estimates and predicting strong growth in 2023. .

Musk said global demand is now flooded with orders twice as fast as car production, thanks to the January car price cuts.

“The most common question we get from investors is about demand,” Musk said. “I want to put that concern to rest. We’ve seen the strongest orders ever so far in January.”

Tesla expects gross margins on its cars to exceed 20%, allaying analysts’ concerns that price cuts could hurt profits. Musk also forecasts global sales of up to 2 million units this year, up from his 1.3 million in 2022. Tesla’s official estimate for 2023 is his 1.8 million units.

“Despite general caution over the EV market in early 2023, Tesla is the new top spot in the U.S. car market,” Morgan Stanley’s Adam Jonas said in a research note. is likely to win the price war: “We wonder if our competitors will be able to keep up in this EV race.”

Other analysts echoed Tesla’s bullish tone, which already holds a 65% share of the U.S. EV market and is eligible for new tax incentives of up to $7,500 per vehicle. increase.

Combined with the price cut and the full EV credit, Tesla’s best-selling Model Y is about $20,000 cheaper for US customers who qualify for tax breaks.

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