Are EVs or Tesla Stalling? Or is China Winning?

By Patrick Moorhead - April 11, 2024

The Six Five team discusses Are EVs or Tesla Stalling? Or is China Winning?

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Daniel Newman: We talked a little bit about the Tesla robots, but let’s talk about Tesla vehicles. A couple things going on this week was a big week because there was some delivery and production numbers that came out. The company produced some big numbers but delivered well below expectations. Stock got hammered. Questions are coming is Tesla… Is it the end of days for Tesla. Are people losing interest in EVs? By the way, everybody loves to hate Elon Musk and I just want to point out did he not share something, I think I shared it with you this week and I wish I could dig it up. Okay, I really do wish I could dig it up quickly for you, but I can’t. But I can remember what I shared with you. It was something along the lines of Twitter having just best numbers it’s ever had. You’re not going to make me go back and answer that are you?

Patrick Moorhead: No, no, I just want to flash it up. It just came through and we stopped talking about that. I wanted to give-

Daniel Newman: It’s fairly different technology. I mean you’re talking an analytics platform versus a data protection platform, but there was a nice article, I’ll put it in the show notes that our team actually put out about the Rubrik filing and then we also were covered in the media quite a bit, so we’ll put some links in the show notes for everybody out there. So anyways, by the way, I just mentioned that X is having all time high engagement on the platform. Again, nobody’s reporting this, who would report it, right? It’s like, but Pat, I got to tell you, I wake up, I have to check Twitter, X, I probably look at it like 400 times a day and I think every other app on my phone, it’s like once, twice maybe messages and email a little bit more.

I love the platform. It’s amazing for getting real time information. I don’t know where else you would go, but whether I’m checking F1 EPL scores or I want to know what’s going on in tech, nowhere better to go. Tesla by the way, numbers are off, demand is down. They had to lower prices to blow out a growing number of Model 3 and Y that hit the streets. There is something going on. And by the way, this isn’t just Tesla. The whole sort of demand and this whole EVs are going to take over the world in the next few years seems to be somewhat stalling out. I’ve been watching on some of the Twitter’s and press about Ford Mustang Machs. A year ago they were going at 10-20K over list. Dealers are blowing these things out at 20K in some cases below list and offering finance rates that are lower than the 10 year right now yield to try to get people to buy these things.

I think people are frustrated and struggling with infrastructure. I know we’re seeing some charging infrastructure going into place, Pat, but if you have range anxiety and you actually drive anywhere far, but the long and the short question is, is Tesla hitting the end hitting peak? Has their growth stalled? I think it has stalled a little bit, but it also is interesting because I mentioned the Xiaomi thing and the lower price and some of the interest coming around that and Tesla is supposed to have a Model 2 coming and they’re also supposed to be doing robotic taxis. Two big initiatives going on at the same time. The Model 2 is supposed to come at a low price. And did you see, I don’t know if you saw Reuters put out a note that basically got heavily shared and tweeted that Musk was scrapping his plans for the Model 2.

Musk came out with a reply to one of them, I think it was the zero hedge tweet that basically said Reuters is lying again. So there’s a big conflict going on. There’s a war in the media. Musk is basically building probably one of the most viewed platforms on the planet for media and information. Then you got this war with the broader press that are trying to constantly challenge Musk in everything he does. Definitely not interested in seeing him being successful, but the numbers are also showing some consternation in the marketplace around EVs. Do we need a lower price one Pat? Do we need a Model 2 in the twenties? Is that even achievable? I feel like it costs me 20 grand to go to the grocery store right now and just get food for the house, let alone to buy a car. So if he can actually get a Model 2 that’s going to be sub 30K, that’ll be crazy.

Having said that, I think winning the autonomy race is more important than coming out with a 20K, 25K Model 2 vehicle. And so I do think, and I could see maybe some prioritization right now on the Model 2, sorry, flip that prioritization on the robotic taxi. He has made this FSD a big thing. He did talk this week about licensing self-drive to other vehicle makers. Very interesting. Could he be putting more focus there, slowing down on the production. He’s now making, right-hand vehicles, he’s doing all kinds of things. I don’t think they’re in trouble.

I think it’s short term. I think we’re in a bit of a lull. I think I’m going to end where I started Pat and I’m going to pass it back to you. I think the numbers we get fed about where the economy’s at versus where it’s actually at are not the same. I don’t think we’re as strong as people want us to believe. I think there’s a lot of revisions going on in the data. I think people are a little bit more nervous. Interest rates are still high, they’re not spending as fast and that of course is going to impact the car industry. But I do think electrification isn’t picking up quite as fast as people want for vehicles. At least people that want to see us go all electric in the near term.

Patrick Moorhead: I have two things to bring up. First thing are interest rates on new cars. The first thing is, so the typical credit score in the United States is around 700.

Daniel Newman: It’s pretty good.

Patrick Moorhead: Do you know what the interest rate for a car, if you have a 700?

Daniel Newman: 8.5.

Patrick Moorhead: 12.65% is the-

Daniel Newman: Come on!

Patrick Moorhead: As of-

Daniel Newman: Really?

Patrick Moorhead: … Today. And you know what? If you’re 699, it’s 17.84%.

Daniel Newman: We’re in the wrong business, dude.

Patrick Moorhead: It is absolutely ridiculous. So that’s one point I do think that’s weighing on Tesla in the United States and in China there’s a whole heck of a lot of competition and there is a freaking price war going on. And with all that capital expenditure that the company has made in China with a factory, they have to sell stuff out. So their slinging mud and they’re in the mud with the Chinese manufacturers. The only way that Tesla gets out of that mess is first of all bleeding the competitors but also robotic manufacturing. And that’s where I think Optimus comes into play and those people who are looking for EVs and not necessarily the self-driving capabilities, there is a lot of competition that’s out there right now. The combination of EV plus the level of safety that Tesla brings to the table is unparalleled.

There’s a full self-driving capability that’s out there in beta, but it’s not even necessarily… I mean it’s not approved and multiple people aren’t looking at that right now. So lots of things going on. I think there’s a lot of Elon. We hate Elon out there. As you said in the run-up but more competition, interest rates. Interest rates sucks. Tesla needs to come out with their next hurrah and I think you mentioned too, which is Robotaxi plus this Model 2, which will be manufactured here in our awesome Austin, Texas. If I were on my other porch on the other side, you might even be able to get a glimpse of-

Daniel Newman: And everybody, that’s not a fake background. That’s the way Pat lives.

Patrick Moorhead: Oh, come on now, Dusty, yeah.

Daniel Newman: Good looking background, man. That’s a dream for me and most Tesla Model 3 owners. By the way, the Model 3, they did also offer huge discounts, but you do realize I’m a bit of a car guy, everybody. So if you get 0% interest, Pat, it’s $16.67 cents per thousand on a five-year note. So if you have a $30,000 car, it’s like 500 something bucks a month or something like around 500 bucks at 16% on a $30,000 car you’ve added like…

Patrick Moorhead: You saw the meme of that lady talking about her $3,000 a month monthly bill for her car.

Daniel Newman: Dude, you’re adding almost $6,000 a year of interest.

Patrick Moorhead: No, I mean think about it-

Daniel Newman: You’re at $500 a month with another $500 a month of interest. So you just doubled the payment for the same vehicle. People are going… Okay, inflation is a problem people and interest rates of 16% to buy a freaking car.

Patrick Moorhead: We go back where food was priced five years ago, there’s not a single measurement that says we aren’t up 25%. And you think of the typical American family trying to pay for food. We’ve seen that energy in California, electricity is up, what, 50%. I mean-

Daniel Newman: How are we getting 3%?

Patrick Moorhead: What’s that?

Daniel Newman: Where’s the 3% number come from?

Patrick Moorhead: It’s a joke, that’s year over year. But what that doesn’t bring into account that real wages are stagnant. If real wages are stagnant and inflation went up one year, 12%, then seven and then three, you can stack all of those increases and look back. And that’s very frustrating for me. And I feel like I’m not in this elitist type of thing, but it’s such an elitist type of point of view to forget about the increases over the last five years. That’s what’s devastating to Americans. And people are like, “Gosh, inflation is tame. And why do people still think the economy sucks?” They can’t afford cars. Food is expensive. Electricity and gas are still more expensive. Actually, I need to go back and look at gas. Electricity is in certain states and my gosh, there are certain insurers in California who are pulling out saying that properties are uninsurable and what happens when competition pulls out of anything, average insurance rates for homes are going up.

Patrick Moorhead

Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.