After reviewing yesterday’s $Tesla(TSLA.US) conference call transcript, we remain skeptical of TSLA’s plans to introduce more affordable vehicles, which appear to be scaled down versions of existing M-Y and M-3 trims, rather than new form factors that allow $Tesla(TSLA.US) to enter new segments (e.g. compact) that expand TSLA TAM.
In the earnings call transcript, CFO Taneja indicated the more affordable vehicles would be “within the [existing] form factor,” while Elon criticized Nokia’s strategy in cell phones after Apple launched iPhone, where Nokia “kept making flip phones, trying to find another market niche, maybe somebody wants a phone of a different style, maybe this different color or whatever it is” when instead Nokia just needed to produce “a super intelligent phone.” Our view is the more affordable trims will cannibalize higher priced M-Y and M-3 trims, and earnings trajectories will resemble TSLA’s experience from 2023-2024, when 20% price cuts funded by cost reductions caused analysts to cut earnings estimates by 50%+ as the price cuts added little or no incremental volume.
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