Tesla heads into an uncertain, low-cost future | Opinion

Volkswagen Golf 8 at the Beijing Auto Show in September 2020.
Volkswagen Golf 8 at the Beijing Auto Show in September 2020.Thomas Peter (REUTERS)

Tesla’s disappointing first-quarter results show how much the pandemic has been kind to it. At its peak in 2022, when its valuation exceeded $1 trillion, it was extremely profitable and growing at breakneck speed. Now that electric vehicle sales have plummeted, Tesla’s growth has stalled. Elon Musk is trying to convince shareholders of a $450 billion company that the future will be as good as the past.

At the very least, they should expect it to be better than the real thing. According to LSEG, revenue of 17 billion in January-March was 11% lower than analysts’ expectations. Earnings per share also missed target, and gross profit in its core business, adjusted for regulated credit sales, is half of what it was in its prime. In another sign that Tesla’s shine is fading, sales fell year-over-year for the first time since the pandemic began.

In hindsight, some post-Covid downturn was inevitable. During those years, consumers had more money than usual and Tesla did not have effective competition. Its biggest U.S. competitors, General Motors and Ford, have been hit by parts shortages and their combined share of the battery-powered car market has fallen below 5%. But there were no eager early buyers left. U.S. electric vehicle sales just recorded their first quarterly decline in years, according to Cox Automotive. Prices have fallen.

Tesla still has high hopes: It announced it would speed up development of “affordable” versions, which could refer to the long-awaited $25,000 car, although Reuters reported on the 5th that the project had been scrapped. Moreover, Musk claims that production will begin earlier than promised, although details remain frustratingly vague. The dream is that it will confirm Musk’s mantra that Tesla is simply “between waves of growth” before new blockbuster models or robotaxis catapult it back into the stratosphere.

Meanwhile, Tesla is investing more money than it generates and its competitors are getting stronger. GM said in its own results Tuesday that its combustion business is gaining momentum, giving it profits it can reinvest in its electric business. It’s no surprise that Musk wants investors to focus on the future of Tesla’s cheap cars, speculative as they may be, rather than their unattractive present.

Beijing Hall

The Beijing Auto Show, the first since the pandemic, will be a battleground. Foreign manufacturers will showcase an arsenal of new ideas as they seek to fend off their Chinese competitors. About 700 exhibitors are expected to attend the fair, which begins today. Many of them attended last year’s show in Munich, where brands such as BYD and Xpeng displayed fleets of sophisticated and competitive electric vehicles. For the first time since the country joined the World Trade Organization in 2001, Chinese firms ended the year with a combined domestic market share greater than that of foreign firms.

The counter-offensive has begun. Foreign companies are expected to present up to 30 unproduced cars at the exhibition, Bloomberg reports. Volkswagen will present six new models. Musk joined the controversy on Sunday, saying he could launch Tesla’s “full self-driving” software “very soon” in China. Toyota and Nissan Announce Prototyping Plans, Local Collaboration

Chinese manufacturers are upping the ante. Xiaomi announced Tuesday that it has already closed more than 70,000 sales of its affordable first Porsche-like model. Autonomous driving pioneers such as Pony.ai, DeepRoute.ai and Baidu are breaking new ground. Before the fair, Baidu had already arranged rides for visitors in its robotaxi along designated roads in Beijing.

The Chinese market is crucial in its own right: it is the world’s largest, with sales of 22 million vehicles in 2023, according to the China Passenger Car Association. But rising sales of battery-powered brands have also turned the country into the world’s largest car exporter, with nearly 5 million units. By 2030, 20% of engines on roads in the EU and US are likely to be battery-powered, according to the latest International Energy Agency forecasts. This explains why Brussels is investigating whether Geely, BYD and SAIC are benefiting from unfair subsidies and why Washington is trying to keep Chinese cars and parts out of North America.

It is unknown whether Musk’s goal will be to beat his Asian giant rivals on their own playing field with cheaper models to stop BYD, valued at $79 billion, from snatching the crown of the world’s largest car seller from Tesla. But it’s a sign that China’s car war won’t run out of batteries anytime soon.

The authors are reviewers Reuters: latest reviews. The opinions are yours. Translation, from Carlos Gomez belowit’s a responsibility Five days

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