Tesla's "Earnings Day" is here! In addition to the profit margin under the "price war," the market is also concerned about these matters.

Large bank stocks have made a good start to the US earnings season, and investors are now closely watching the performance of large technology stocks, which will announce their results in the near future.

After the market closes on Wednesday local time, Tesla will announce its second-quarter earnings. Analysts expect Tesla's revenue to increase by 44.5% to $24.49 billion.

However, after a fierce price war in the first half of the year, the average target price difference between "buy" and "hold" ratings given by analysts to Tesla is as high as $85. The difference of opinions on Wall Street has reached a record level.

In addition to the almost certain decline in the gross profit margin of automobiles, the market is also concerned about Tesla's expansion plans in countries such as India and the introduction of new models like the Cybertruck.

Tesla's stock price has risen by 168% so far this year. In the past four quarters, Tesla's stock price has averaged a 9% increase or decrease each time the company released its earnings report.

Without a doubt, the release of this earnings report will once again stir up a storm in the market.

Declining Gross Profit Margin of Automobiles? It may not be a big problem

The gross profit margin of automobiles is the most worrying aspect of this quarter's performance for investors.

The continuous price reductions have obviously boosted sales. In the second quarter, Tesla's global production and delivery reached a record high of 479,999 and 466,140 vehicles, respectively. This represents a 10% increase compared to the previous quarter and an 83% increase compared to the same period last year.

However, these price reductions and discounts may further erode Tesla's profit margin. Tesla's automotive gross profit margin in the first quarter of this year was 21.1%, and Wall Street expects it to decline to 19% this quarter.

However, some analysts believe that the decline in gross profit margin is only temporary and is expected to bottom out and rebound this quarter.

In a report on Monday, Wedbush analyst Dan Ives wrote:

"We believe Tesla's automotive gross margin is around 17.5%. The second quarter is the trough quarter for Tesla's overall gross margin, and the gross margin will rebound in the coming quarters and return to the 20% level by 2024."

Gene Munster, Managing Partner at Loup Ventures, told CNBC that he expects Tesla's automotive gross margin in the second quarter to be only 17%-18%.

But he said:

"I don't think this will ultimately be a problem for the stock price. The CFO will tell us that the gross margin is expected to continue to improve in the second half of this year."

He expects that Tesla's profit margin will improve in the second half of this year or next year.

Munster is optimistic about Tesla's prospects, believing that the long-term factors affecting the stock price are not the automotive gross profit margin, but Tesla's market share. The key is whether Tesla's market share can reach 10-20% when electric vehicles eventually account for 100% of car sales. **

According to his calculations, if Tesla can capture 10% of the entire electric vehicle market within ten years, its business scale will also reach $1.1 trillion (this year's revenue is expected to be $130 billion).

In addition, Tesla bulls like Wood Sister believe that price reductions can boost sales and collect more data for Tesla's autonomous driving technology. The sacrificed profits at this moment can be rewarded in the future. They believe that Tesla is not just an automaker, but also an artificial intelligence company.

Musk has previously stated that he is willing to sacrifice Tesla's profits in the short term to actively compete for market share, with the goal of making more money when "fully autonomous driving" is achieved, and earning additional income through the operation of "robotaxis".

This seems to be gradually recognized by the market.

Philippe Houchois, an analyst at Jefferies, recently released a report stating that the second quarter will be the low point of Tesla's gross margin, which is currently the consensus on Wall Street. Moreover, at present, the valuation driving factors of Tesla seem to have changed, and the market seems to have begun to believe that Tesla is an artificial intelligence company and anticipates the huge revenue potential of its autonomous driving technology.

Goldman Sachs and Morgan Stanley also released reports pointing out that the bottoming out of automotive gross margins and the advantage of AI technology are the main factors driving Tesla's recent frenzy-like rise.

However, all three investment banks believe that there is currently no need to reevaluate Tesla's stock based on these factors.

New Model: Market Needs More Details

Last weekend, Tesla announced that the first Cybertruck, which had been delayed several times, finally rolled off the production line at the Austin, Texas Gigafactory.

Stimulated by this news, the company's stock price rose slightly on Monday. However, many market participants accused Tesla of blatant speculation by announcing this news before the earnings release.

This is mainly because, apart from announcing the production of the first Cybertruck, Tesla has not disclosed any other details about this electric pickup truck or its production plans.

This angular, futuristic-looking pickup truck with a stainless steel body was first unveiled in 2019. At that time, Tesla expected the Cybertruck to start production and delivery in 2021. However, Tesla has repeatedly postponed the production of the Cybertruck, citing parts shortages.

Apart from the publicly available appearance and interior, little is known about the Cybertruck at present.

In May, Musk stated that once production begins, the annual production of the Cybertruck can reach 250,000 to 500,000 units.

During this earnings conference call, analysts are expected to focus on issues such as Cybertruck pricing, other specifications, when the first deliveries will begin, and when mass production will start. Outside of the Cybertruck, the market's attention is also focused on Tesla's undisclosed affordable new model, Model 2.

Earlier this month, according to the governor of the state where Tesla's Mexico Gigafactory is located, Tesla has completed the design work for the new model Model 2. It will become the "best" and most affordable electric vehicle in the world:

"The information we have is that they have now entered the final stage of designing the new model, which, as far as we know, will be the best and most affordable electric vehicle in the world. This will be a milestone."

The news of Tesla's factory in India, which emerged earlier this month, also revealed the pricing of the Model 2.

According to Indian media outlets, the Tesla India car factory, with a planned annual production of 500,000 electric vehicles, is expected to have a starting price of 2 million rupees (approximately 174,600 RMB). Considering that Tesla currently does not have a model in this price range, this means that Tesla may produce a new platform model in India, most likely the Model 2, with a price around 170,000 RMB.

Tesla's Overseas Expansion Plan, AI Advancements, and Supercharging Network

In addition to India, there have been recent reports of Tesla planning to build a factory in France. Furthermore, according to The Wall Street Journal, Tesla also plans to expand its Berlin factory, with the factory's footprint expected to at least double.

Tesla may reveal new developments in its overseas expansion during this earnings conference.

Another major focus is Tesla's artificial intelligence business.

Since Nvidia's better-than-expected first-quarter performance at the end of May, Tesla's stock price has risen nearly 60%. Although Tesla does not have the same "shovel-selling" influence over the entire AI industry as Nvidia does, it uses AI to train its autonomous driving technology, and hundreds of thousands of Tesla owners have purchased Tesla's most expensive Autopilot package. Therefore, it can also benefit from the optimistic sentiment brought by Nvidia's strong performance.

Furthermore, Tesla's humanoid robot business, which is still in its early stages, is expected to become one of the most important applications of AI technology and has extremely enticing potential.

In addition, in the second quarter, Tesla announced agreements with multiple automakers to open up its Supercharging network to non-Tesla electric vehicles. The Supercharger network is also expected to be a driving factor for Tesla's revenue.

Throughout the quarter, Tesla deployed 3,889 megawatt-hours of battery storage, setting a new record and achieving a year-on-year growth of 360%. With the increasing penetration rate of electric vehicles, the advantage of having an established charging network is expected to create a continuous stream of revenue growth.