Tesla Stock Surges as Markets Cheer New Models and Advertisement Plans

Tesla stock (NYSE: TSLA) closed sharply higher yesterday after the company’s CEO Elon Musk teased two new models at the annual meeting. He also said that Cybertruck is on track for 2023 production and added that Tesla might also start advertising its products.

While Musk did not provide many details about the two models, he has previously said that the company is working on a new vehicle platform that would cost half as much as the Model 3 – which is currently the cheapest car in Tesla’s portfolio.

After multiple price cuts, the Model 3 now starts at just under $40,000 in the US which is the cheapest it has been since the launch. Notably, while Tesla recently raised prices for all the other models it did not raise Model 3 prices.

Tesla stock rose after Musk teased two new models

The company now has a dynamic pricing structure and determines car prices on real-time demand and supply.

The pricing pressure is more intense in EV sedans which could be among the reasons the company did not raise Model 3 prices.

Also, the Model 3 is now aging and Tesla hasn’t done any major revamp since its launch in 2016.

There are rumors that Tesla is refreshing the Model 3 and last month unverified images of what looked like a revamped Model 3 appeared on Reddit.

Musk on advertisement

Tesla does not advertise its cars and instead relies on word of mouth and Musk’s charisma to sell its cars. The strategy paid off reasonably well and Tesla sold around 1.3 million cars in 2022.

Also, its operating margins are way above other automakers who spend a big chunk of their revenues on marketing.

During the annual meeting, Musk talked up advertisement and said “I guess I should say ‘advertising is awesome and everyone should do it’” while adding that Tesla would also “try a little advertising and see how it goes.”

Tesla wants to produce 20 million cars by 2030

Tesla has set a 2023 production guidance of 1.8 million which Musk said can rise to 2 million in the best case.

It has set itself a target of producing 20 million cars annually by 2030. To put that in perspective, Toyota, the world’s largest automaker, sold just over 10 million cars in 2022.

To achieve the goal of 20 million deliveries, which amounts to a CAGR of over 41% between 2023 and 2030, Tesla might need to build many more Gigafactories. In the past, Musk said that the company would need over a dozen Gigafactories to reach that goal.

At the annual day, Musk said that the company can sell 5 million units annually of the two new models. Additionally, he said that it can deliver upto half a million Cybertrucks.

George Soros exited Tesla

The 13F filings showed that George Soros’ fund exited Tesla in the first quarter of 2023. Musk later lashed out at the billionaire who is otherwise known for his philanthropic activities and tweeted “You assume they are good intentions. They are not. He wants to erode the very fabric of civilization. Soros hates humanity.”

Previously also, Musk sparred with Bill Gates for being short on Tesla stock. Musk has often criticized those shorting Tesla and has publicly spared with bears like Jim Chanos and David Einhorn – who are noted Tesla bears.

Tesla has always been a polarizing stock with wide divergence in analysts’ target prices. On one end are bulls like Cathie Wood who recently upped her target price on Tesla to $2,000 and expects the stock to hit that level by 2026.

On the other end are bears like JPMorgan which has a lowly $115 target price on the stock. Even Ashwath Damodaran – popularly known as the “dean of valuation” believes that Tesla stock is way too overvalued.

Musk believes Tesla can be the biggest company globally

During Tesla’s Q4 2022 earnings call, Musk said that he is “convinced” that Tesla would one day become the most valuable company globally. During the Q3 2022 earnings call, Musk predicted that Tesla’s market cap would one day surpass the combined market caps of Apple and Saudi Aramco.

Musk flaunted manufacturing prowess as its real competitive strength. He added that the company is developing other products also. He however said, “We’re not going to announce them, obviously, but they’re very exciting. And I think it will blow people’s minds when they — when we reveal them.”

Musk on FSD

During the Q1 2023 earnings call, Musk talked up the company’s software capabilities and said, “we’re the only ones making cars that, technically, we could sell for 0 profit for now and then yield actually tremendous economics in the future through autonomy. No one else can do that. I’m not sure how many people will appreciate the profundity of what I’ve just said, but it is extremely significant.”

The company currently charges $15,000 for its FSD (full self-driving) subscription and Musk believes the price would eventually rise to as high as $100,000. Notably, Tesla raised FSD price by $5,000 in 2022 also.

Musk slashed Twitter valuation

Musk never shies away from such exorbitant claims. Recently, he slashed Twitter’s valuation by over half to $20 billion but predicted that the social media company’s valuation can rise 12-fold to $250 billion.

That said, to his credit, under Musk’s watch Tesla has become the most valued automaker globally, and in 2021 its market cap surpassed $1.2 trillion.

It not only became the first automaker to have a market cap in excess of $1 trillion but at that time Tesla’s market cap was ahead of the combined market cap of all leading automakers.

Despite having fallen by almost half from the peak, Tesla’s current market cap is over twice that of Toyota – and even Charlie Munger admitted that what Tesla has achieved in the car industry is a “minor miracle.”