Down nearly 30% from its recent high, Tesla (NASDAQ:TSLA) is an EV giant that clearly faces a myriad of challenges in this current environment. The company’s status as a growth stock, with what seemed to be a multi-decade-long potential 50%+ growth profile ahead, is one that’s been called into question. Simply put, rising borrowing costs have pressured car buyers, and left many to reconsider the question of whether electric vehicles make sense for their household needs or not.
From a valuation standpoint, there are other concerns plaguing TSLA stock. The company’s stock price has continued to drop amid various macro and sector-specific concerns. With the tripping of the key Sahm rule, all eyes are on a potential recession. But outside of macro forces, Tesla investors have battled internal issues as well — everything from Musk’s recent antics, a delayed robotaxi event and slowing growth.
Let’s dive into a few potential catalysts Tesla investors are watching and whether they can revive Tesla’s mojo.
Juniper Launch
Tesla launched the refreshed Model 3 last year and many expected a facelift for the Model Y soon after. Despite the delay, Tesla didn’t wait three years for a new model. The Model Y, similar to the Model 3, was kept relevant with updates like revamped suspension, megacastings and improved battery and drive units. As Musk noted, Tesla consistently updated the Model Y, making even six-month-old models distinct.
In China, Tesla enhanced the Model Y with features from the updated Model 3, including ambient lighting and efficient drive units, despite keeping the design unchanged. Although it still appears dated next to the Model 3 Highland, Tesla is testing the Model Y Juniper on public roads. Despite Musk’s 2024 launch denial, the refreshed Model Y is likely to debut early next year.
Production of the refreshed Model Y was set to start in China. With a quick ramp-up needed, Giga Shanghai, Giga Berlin, Fremont and Giga Texas would handle the markets. The Model Y would feature updated Model 3 elements like a streamlined front and LED matrix headlights.
Hertz Rapidly Sells Down Tesla Vehicles
Hertz (NYSE:HTZ) recently accelerated Tesla vehicle sales, planning to sell thousands more this year due to declining values. Three years ago, the company aimed to boost its Tesla fleet with 100,000 units of Model 3s and then later on added Model Ys. Over the years, their Tesla fleet expanded, boosting customer satisfaction.
The resale value of Tesla Model 3 and Model Y vehicles plummeted after price cuts in 2022 and 2023, hurting Hertz’s finances. Once retaining 90% of value in three years, Model 3s lost nearly 50% in the next three years, with Model Ys faring worse. To counteract this, Hertz planned to sell about 20,000 Teslas early and has now accelerated this, aiming to transition its fleet by late 2025, expecting monthly depreciation to stabilize around $300 per unit.
However, Hertz faced $600 monthly depreciation per Tesla unit due to poor timing and market conditions. High interest rates and economic slowdowns forced Tesla to cut prices, amplifying Hertz’s losses from its 100,000-vehicle fleet.
Despite some missteps, such as issues with battery charge requirements, EVs offer significant value, especially for travelers. Tesla’s easy driver profile transfer enhances the rental experience relative to other players in the market. However, this massive sale does indicate that rental car companies aren’t yet in the mass adoption camp and it may take much longer for this to become the case.
Tesla Continues to Decline
Tesla stock dropped 7.3% to $192.33 amid global growth concerns. Although Elon Musk is still confident in Tesla’s capabilities, investors are worried about Tesla’s numbers.
I think there are key fundamental factors driving Tesla’s slowing growth. The brand simply isn’t what it was before, competition has heated up significantly and we’re likely due for a reset in the EV market. For Tesla investors who have banked on 50%+ annual growth rates for the next decade or so, it’s becoming increasingly clear that this trajectory is very unlikely to materialize.
Accordingly, TSLA stock remains a hard sell for me right now. This is a stock I don’t think can regain its mojo over the next five or ten years, whether we’re in a recession or bull market.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
