I know what everyone is going to say but you have to hear me out.
We all know he is smart but what he has done with Tesla price reduction is a whole new level and might be like a nuclear bomb to the entire EV industry. Why? Here are my reasons.
- The demand is clearly there. More are willing to buy and less are worried about the driving range.
- Tesla has reached an economies of scale that nobody can reach
- Rather than building cars only, he build the charging network and FSD that’s almost 100% profit margin
- Everyone is losing money on EV and making more price competitive, traditional OEM’s will lose even more money and a significant drop in demand for their cars.
- Ford lost $4.5 billion this year on EV.
- Dealers of GM ($GM), Ford ($F), Hyundai and Toyota have more than 90 days’ worth of unsold EV’s.
- Rivian ($RIVN) is selling their car for $81,000 but it’s costing them $220,000.
- Lucid ($LCID) reported wider than expected losses due to customer canceling their orders and in our opinion, their cars are just f-ugly.
- Genesis, the Korean luxury brand, sold only 18 of its nearly $82,000 Electrified G80 sedans in the 30 days leading up to June 29, and had 210 in stock nationwide — a 350-day supply, per Cox research.
- Other luxury models, like Audi’s Q4 e-tron and Q8 e-tron and the GMC Hummer EV SUV, also have bloated inventories well above 100 days. All come with hefty price tags that make them ineligible for federal tax credits.
- Imported models like the Kia EV6, Hyundai Ioniq 5 and Nissan Ariya are also stacking up — likely because they’re not eligible for tax credits either.
- The once-hot Ford Mustang Mach-E now has a 117-day supply. Ford says that’s the result of ramped-up production in anticipation of stronger third-quarter sales.
- Cybertruck is coming. So many on the road and people can’t stop talking about them whether it’s good or bad.
- Tesla Model 3 Highland is supposed to be nicer and cheaper. This will not only make other OEM’s struggle in already bad EV market for them but it will take away market shares from ICE cars when Honda Accord is almost already $30,000 to start. We even see $NIO CEO salivating over it.
Don’t forget, Tesla hasn’t even made a dent with parts and services revenue either. And upcoming licensing fee for their charging network and who knows what other revenue streams they will get. And as more and more countries and states banning ICE cars, Tesla will continue to benefit from it.
Is the cut timely? Yes. Is it going to ruin Tesla long-term profitability? No. Are we going to see more EV companies folding? Yes. More traditional OEM’s in severe financial trouble? Probably.
Ultimately, over the last 5 years, $SPY gave you 55% return, a bit more than Toyota. If you look at this chart, why would you ever want to hold onto other OEM stocks besides $TSLA?
Conclusion: this price reduction (which he was testing back and forth on purpose in order to test price elasticity) is a nuclear bomb in automotive industry that will obliterate several OEM’s and new EV companies and we expect $TSLA to reach $447 after they successfully launch Cybertruck.
Don’t just listen to us. Do your own DD before making any investment decisions.