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Thursday, December 14, 2023

Finest Remark On Tesla Demand Challenges I’ve Seen

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I don’t usually see a standalone tweet and assume, “Wow, that’s a superb lengthy remark and evaluation — that might be an article.” Nevertheless, this morning, I did. The commentary comes from a longtime Tesla follower, fan, and shareholder. Nevertheless, he’s an open minded and important one when want be. In actual fact, amongst individuals who solely tweet about Tesla, he appears to be probably the most balanced in optimistic and damaging (congratulatory and important) commentary on the corporate and on Elon Musk. The particular person I’m referring to goes by the title James Cat (@TSLAFanMtl) on Twitter. The next is his tweet on Tesla demand development and the struggles it faces:

“Seen some dialogue recently about Elon’s impression on Tesla demand and subsequent impression on value and revenue.

“Right here is my take.

“All of these things may be very onerous to isolate and quantify in a silo. We do have some information that reveals Tesla model fairness has taken a success since Twitter. Imo this can be a issue, however not THE issue, that explains it. And it’s not rates of interest, both. Rates of interest impacts all manufacturers equally and but regardless of the rate of interest atmosphere, each market volumes and costs are up. Shoppers have broadly accepted to pay extra — simply not for Teslas.

“So as of lowering significance, right here is why I feel Tesla has needed to lower costs so aggressively relative to the market:

“1. Tesla vastly expanded its provide in 2023.

“Tesla’s valuation and mission relies on development. It’s tougher to develop from a base of 1.3M than from a base of 0.9M with the identical car lineup. Except demand elevated organically comparatively to 2022 ranges, Tesla would want to lower value to maneuver that additional quantity. Demand has not elevated organically nor has it elevated sufficient to offset the necessity to bargain.

“That is particularly vital as a result of Berlin and Austin are working nicely beneath capability. Factories working beneath capability generate extreme prices.

“2. EV early adopters have been satiated.

“The shoppers that haven’t but made the bounce to EVs have hesitations. They’re involved about vary, charging and are beneath the phantasm that EVs are ‘costly.’ They don’t know what tax credit/federal/state incentives exist to assist decrease the fee. They don’t perceive the price of possession idea.

“All of this may be mounted with an aggressive, broad-based promoting marketing campaign and PR marketing campaign — for my part — as a result of none of these issues are precise issues as soon as individuals perceive the problems.

“3. Oblique competitors…in China.

“Tesla has no direct competitors for 3/Y. Anyplace. It’s not even shut. However…Tesla does have EV competitors in China each above and beneath the three/Y value level. This has induced a little bit of a squeeze on 3/Y in China — forcing value down a bit there — but in addition, importantly, it has elevated Tesla’s have to export. This, in flip, has elevated provide in different elements of the world — and we return to level #1 — an excessive amount of provide relative to demand.

“4. And at last, Elon has alienated a big a part of Tesla’s core demographic — educated, left-of-centre progressives. Say what you need about how individuals shouldnt base their buying choices on firm CEOs. Advantageous. Elon is greater than Tesla’s CEO; he’s additionally the face of the model. Prefer it or not, his model and Tesla’s model are linked, for higher or worse. The Twitter acquisition and Elon’s use of it since has been the worst factor to occur to Tesla’s model…ever. There are a selection of information factors that present this and when you’ve been following me for some time, you’ll have seen these by now.

“In order that’s the place we stand with Tesla and that has defined what occurred in 2023. What about 2024? I’m glad you requested. I’m beginning to work on a 2024 forecast and can share in due time.”

There was one reply that caught my consideration as nicely, together with his response to the reply. Farzad responded: “Nice write up. My level with 4 is that though that is true, we aren’t accounting for the alternative finish of the spectrum, even when these of us are usually much less prosperous and extra conservative of their purchases. These of us at the moment are paying consideration that historically by no means had been.

“There’s additionally the silent majority that nobody is speaking about, which drove quantity in 2023, and has induced the model to be essentially the most searched in 2023 globally and within the US after being nowhere to be discovered. Left wing progressives being offended at Elon IMO shouldn’t be sufficient of a variable to represent ‘Elon being lively on X is unhealthy’. Giving Tesla’s core historic demographic an excessive amount of of a weight fully ignores the very fact Tesla’s long run demographic is 80% of the worldwide inhabitants that’s searching for a transportation system.”

And right here is the response to that from James: “There have been a number of experiences which have confirmed that the positive aspects Tesla has made on the correct haven’t offset the losses on the left. And different experiences that confirmed that of all manufacturers, Tesla’s buyer base was the furthest left. That is with out query a web loss. And sadly it was all pointless.”

It’s an fascinating dialogue, and one which has been occurring for a very long time. I respect individuals like James pushing via the tribal mud to have actual conversations about these things. Sadly, I don’t assume the core issues are going away anytime quickly and I feel they may stay main components of concern for Tesla so far as the attention can see. However that’s the place we’re.

Chime in with your personal ideas down within the feedback.

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