Well, occasionally, I do other things than write this column. I am now in Brazil, as the country is in mourning Seleção's loss to the Netherlands. So, what a better time than offer a peek at my research-writing for São Paulo-based OHM Research on Tesla (TSLA) .
As I write, the Nasdaq is up in the day's trading -- barely -- because the inflation expectations component of the Consumer Sentiment survey was slower than expected (even while actual inflation as last measured by the producer price index was actually higher than expected...).
And, look, Tesla shares are up by 4.4%, as well, for no good reason. But they are also down around 50% year-to-date for all the right reasons.
Amid this action, here are some thoughts I jotted down earlier re: the extreme downturn in demand for Tesla in China:
The media articles are coming fast-and furious this week about Tesla China. Those articles paint the picture of a company that is drastically trying to lower production. This can only be caused by a slowdown in demand.
Each other major global auto original equipment manufacturer has a dealer network. Tesla is online-order-only. Tesla has showrooms, but actual deliveries are still fulfilled via the online order portal. This model has been the envy of the other major OEMs. When demand is growing, it is more efficient. There is no "dealer margin" to be shared as the other OEMs are forced to do.
But when demand slows, we are reminded that those dealerships are a very useful place to hold excess inventories. This allows the established OEMs to run their factories on a more even basis. This is called plant loading.
Without these large parking lots (dealers make most of their profits on service and repair) Tesla is unable to respond quickly to demand.
And then I added this:
The clear read-through for analysts is this: Estimates for Tesla deliveries will have to be reduced.
My fourth-quarter 2022 estimate is now 435,000 units delivered by Tesla versus 430,000 previously, which would put TSLA at 1.333 million units delivered in 2022. This would be growth of 42.5%, well below Elon Musk's much-worshiped (by gullible Wall Street analysts, anyway) projection of 50% annual growth for Tesla unit deliveries in any year
So, that's not going to happen in 2022, but, as the shutdowns in China and separate reports of much-slower-than-planned ramp-up of Tesla's facility in Gruenheide, Germany, attest. 2023 will be much worse for TSLA than 2002, from a growth standpoint.
I am reducing my 2023 Tesla deliveries estimate to 1.42 million units from my prior estimate of 1.44 million. That estimate now represents y-o-y growth of only 6.48% for Tesla's auto decision in 2023.
That's it. And that is how you make money trading this market. TSLA is up today on some extremely flimsy -- survey within a survey -- premise, while Tesla management is practically screaming that demand in China is falling off a cliff.
I report. You decide. My firm is short TSLA. And has been all year.
