Interactive Investor

ii view: Tesla reports record quarterly deliveries

4th January 2022 11:06

Keith Bowman from interactive investor

Production is growing and customer demand is clear, but do rivals offer a better buying opportunity? 

Fourth-quarter production and deliveries

  • Production up 70% on Q4 2020 to 305,840 vehicles
  • Deliveries up 71% to 308,600 vehicles  

ii round-up:

Electric vehicle maker Tesla (NASDAQ:TSLA) on Sunday reported record quarterly deliveries, beating analyst forecasts and lifting its shares by around 10% in US Monday trading.

Fourth-quarter 2021 deliveries to customers rose 71% to 308,600 vehicles, exceeding Wall Street forecasts for nearer to 260,000 and easily topping third-quarter deliveries of 241,300. Deliveries are the closest number Tesla offers to sales data. 

Tesla shares have climbed by more than 60% over the last year to almost $1,200 each. Shares for rivals Ford (NYSE:F) and General Motors (NYSE:GM) are up by 156% and 51% respectively, while Aston Martin Lagonda (LSE:AML) is down by 25%. 

Full-year 2021 Tesla deliveries rose to 936,172 from 499,550 in 2020, with 2021 production totalling 930,422 vehicles. Existing manufacturing plants in both Fremont in the US and Shanghai in China are soon to be joined by plants in both Austin Texas US and Berlin Germany. 

Broker Morgan Stanley estimates the gross profit margin for Tesla's Chinese plant to be double that of Fremont in the US, with the two new plants expected to generate even higher margins which it expects will eventually be invested into products, network expansion and pricing. 

The new Berlin plant was scheduled to start production back in the summer of 2021. Vehicles made at its China factory are currently shipped to Europe and some Asian countries.

Analysts estimate that annual production could eventually hit 3 million units once its new plants are fully operational, up from a current annualised 1.23 million units, although it cautions on the likely pace of production acceleration given industry wide supply chain issues and a shortage of microchips. 

Pending fourth-quarter results for the maker of the Model 3 and Model S cars is estimated to be around 26 January. 

ii view:

Founded in 2003, the US headquartered company today has a stock market value of over $1 trillion. That compares to under $90 billion for both US rivals General Motor and Ford and around $130 billion for major European vehicle maker Volkswagen (XETRA:VOW). Tesla is headed by high profile entrepreneur Elon Musk.

For investors, rising demand and increasing production add to potential to expand into new markets such as India and Russia. Climate change and a US government with green aspirations provide a positive backdrop, while its other businesses such as solar energy also need to be remembered. So does the potential of its own vehicle software and the development of autopilot and full self-driving capabilities.  

But a 1,200%-plus rise in the share price since pandemic market lows back in March 2020 has raised valuation questions. Just about all of its more traditional rivals are also adding to their line-up of electric or hybrid vehicles. Western relations with China, a core manufacturing location, also remain strained. Finally, an estimated price to Net Asset Value (NAV) of around 50 times compares to under three at rivals VW, Ford and General Motors, suggesting the valuation is far from cheap. For now, and while progress at Tesla is highly evident, a significant amount of good news already looks to be in the price.  

Positives: 

  • Clear customer demand
  • Climate change concerns are growing globally

Negatives:

  • Competition from other manufacturers is increasing
  • Persisting valuation concerns

The average rating of stock market analysts:

Strong hold

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