With a market value soaring by over 240 billion in just 11 days, is Tesla's prosperity due to the "AI bubble"?

Recently, Tesla (TSLA.US), whose stock price has been soaring, has achieved an astonishing 11 consecutive days of gains, wiping out the previous shame of almost being kicked out of the "Big Seven" in the US stock market. On July 10th local time, Tesla closed at $263.26, marking the 11th consecutive trading day of gains, with a total market value increase of $242.3 billion (approximately RMB 17.7 trillion).

Just in February this year, due to frequent negative news, Tesla's market value evaporated by over $210 billion, becoming the only stock in the "Big Seven" in the US stock market to have fallen in the past 12 months. This led to discussions on Wall Street about whether Tesla could maintain its position in the secondary market.

However, in less than 3 months, Tesla has rebounded by nearly 90% from its low of $138.8, not far from its high of $299 a year ago. The market mostly attributes this rebound to its Q1 performance and Q2 sales volume exceeding market expectations, as well as the possibility that its AI business may be underestimated.

However, not everyone holds optimistic expectations for Tesla's future. Bill Gross, a renowned investor known as the "Bond King," believes that Tesla's current stock price trend is like a "meme stock," with fundamentals not strong enough to support its rise.

Facing sales bottlenecks, Tesla is betting on entry-level economy models

From previous financial reports, Tesla's revenue and profit both declined in the first quarter. Despite revenue exceeding Wall Street analysts' expectations, adjusted diluted earnings per share fell short of analysts' expectations.

It was disclosed that in the first quarter of 2024, Tesla's total revenue was $21.301 billion, a 9% year-on-year decrease, marking the largest decline since 2012; net profit was $1.144 billion, a significant decrease compared to the net profit of $2.539 billion in the same period last year; net profit attributable to common stockholders was $1.129 billion, a 55% year-on-year decrease.

By business segment, Q1 total revenue from automotive-related businesses was $17.378 billion, a 13% decrease compared to $19.963 billion in the same period last year, and also a decrease from the previous quarter's $21.563 billion; revenue from power generation and energy storage business in Q1 was $1.635 billion, a 78% year-on-year increase; revenue from services and other businesses was $2.288 billion, a 25% year-on-year increase.

With mixed results in the first quarter, Tesla's recent upward momentum may mainly come from the better-than-expected delivery data in the second quarterAccording to the Zhitong Finance and Economics APP, Tesla achieved a total delivery volume of 444,000 vehicles in the second quarter of 2024, a decrease of 4.8% compared to the same period last year. This marks the first time Tesla has seen a year-on-year decline in sales for two consecutive quarters. In the first half of the year, Tesla delivered a total of 830,800 vehicles globally, a 6.6% decrease in sales compared to the same period last year, but still exceeding Wall Street's pessimistic expectations.

Currently, Tesla's vehicle models include the Model 3/Y, Model S, Model X, Cybertruck, and Tesla Semi. As the company's main sales force, the Model 3/Y series produced 386,600 vehicles and delivered 422,400 vehicles this quarter, exceeding expectations in both production and sales.

Although Tesla has not disclosed sales data for other specific models, media estimates suggest that sales of the Model S/X are roughly between 12,000 and 13,000 vehicles, a decrease of approximately 31% to 37% compared to the same period last year. The highly anticipated Cybertruck delivered approximately 8,000 to 9,000 vehicles in the second quarter.

Four years after its release, the production of the all-electric pickup truck Cybertruck has still been fraught with challenges. This year, deliveries have been repeatedly suspended, delayed, or recalled due to various manufacturing process issues. According to recent information sent by the company to some Cybertruck reservation holders, the delivery date for non-base model Cybertrucks may be postponed until next year.

Compared to traditional automakers, Tesla's product lineup is not very diverse and is currently facing challenges of aging models and a lack of new products. To attract consumers, Tesla is planning to launch a more affordable next-generation electric vehicle.

Previously, Tesla revealed plans to introduce a compact all-electric vehicle called "Model 2" priced at around $25,000, positioned as an entry-level electric vehicle for the mass market and potentially becoming the most affordable model in Tesla's product line. During a recent earnings conference, Musk also stated that this affordable new car is planned to start production in early 2025 or by the end of this year, earlier than previously expected, and this new car will be produced on the company's existing production lines without the need for additional investment in new production lines, which will help the company fully utilize its existing capacity and achieve rapid production growth.

Stagnant Growth in Tesla's Core Business Due to Price Reductions and Consumer Skepticism

Whether it's the continuous price reductions in recent years or the launch of the budget-friendly Model 2, it seems to indicate that Tesla, once focused on the high-end market, is now also caught in the accelerating "internal competition" of new energy vehicles. This year, with Tesla leading the way in price reductions, companies like Li Auto, SAIC-GM-Wuling, Changan Automobile, and Beijing Hyundai have also followed suit, aiming to gain market share by offering lower pricesLooking ahead to the second half of the year, lithium carbonate prices continue to remain low, providing further room for car manufacturers to lower prices; while economic growth in the second half of the year still faces the risk of slowing down, consumer confidence is expected to remain low, and the competitive pricing situation for car manufacturers is unlikely to change in the short term.

According to data from Tichao TI, most mainstream domestic new energy vehicle brands in China are still far from achieving their annual sales targets, and car manufacturers will continue to face significant sales pressure in the second half of the year.

According to information from the Zhitong Finance and Economics APP, apart from facing fierce competition from numerous emerging new energy vehicle companies in the Chinese market, Tesla's situation in the U.S. market is also not optimistic.

According to the well-known automotive data company Cox Automotive in the "Kelley Blue Book," although electric vehicle sales in the U.S. hit a historic high in Q2, Tesla's U.S. sales dropped by 6.3%, with market share falling below 50% for the first time to 49.7%; in contrast, companies such as Mercedes-Benz, General Motors, Ford, Hyundai, and Kia saw a cumulative year-on-year sales growth of 11.3% in the U.S. market in the second quarter.

With the U.S. Treasury Department's new battery procurement rules taking effect on January 1, 2024, many electric vehicles, including the Tesla Model Y and Cybertruck all-wheel-drive versions, lost eligibility for the maximum $7,500 tax credit exemption. After the new rules took effect, the number of electric vehicle models eligible for the U.S. electric vehicle tax credit dropped from 43 to 19.

At a time when subsidies are declining, a recent survey by the American Automobile Association (AAA) also showed that the vast majority of American consumers (63%) said they are "unlikely or very unlikely" to buy an electric vehicle, with only 18% of respondents saying they are "very likely" or "likely" to buy an electric vehicle. Cost, range anxiety, and lack of charging infrastructure have become key factors influencing consumer decisions.

Meanwhile, interest in hybrid vehicles among American consumers is on the rise, with Toyota's RAV4 hybrid vehicle sales in the U.S. soaring by 195% in the first quarter of this year, Prius hybrid vehicle sales rising by 105%, and Camry hybrid vehicle sales increasing by 143%; Ford's total hybrid vehicle sales in Q1 also grew by 42% to 38,421 units, the highest since the company started selling hybrid models.

Will AI Business Become the New Focus of the Market?

While the automotive business faces challenges, an increasing number of investors are shifting their focus to Tesla's AI, autonomous driving, and energy storage businessIn April, Musk announced on social media the launch plan for Robotaxi, confirming that Robotaxi will be released in August this year. Musk further pointed out that Tesla's cumulative investment in the field of autonomous driving (computing power training, large-scale data pipeline, and video storage) this year will exceed $10 billion.

Cathie Wood, also known as the "female version of Buffett," is a staunch supporter of Tesla. She recently stated that the opportunity of the autonomous driving taxi network and the entire ecosystem around it will generate $8 trillion to $10 trillion in revenue in the next 5 to 10 years, with half of it potentially belonging to Tesla.

According to foreign media reports, Tesla will also invest $500 million in the Buffalo Super Factory in New York to build the Dojo supercomputer to improve Tesla's fully autonomous driving system. Previously, Morgan Stanley analysts believed that this system will increase Tesla's market value by $500 billion in the foreseeable future.

As of the first quarter of this year, energy production and storage remain Tesla's most profitable business, with revenue increasing by 7% year-on-year, gross profit increasing by 140%, and energy storage deployment reaching a record-breaking 4.1 GWh. The company stated that it will continue to push the 40 GWh super factory in Lathrop, California to full production capacity, and the Shanghai energy storage super factory is scheduled to start construction in May 2024 and achieve mass production in the first quarter of 2025.

Overall, in Tesla's "Vehicle, Energy, AI" layout, although the automotive business slightly exceeded expectations in the first half of the year, it still faces growth pressure in the medium to long term; the energy storage business is in a period of rapid development and will also need to compete with many domestic leading companies in the future. In contrast, amidst the enthusiastic pursuit of AI concepts in the capital market, the autonomous driving and AI business may be the "hidden driver" behind Tesla's astonishing stock price surge