Has Tesla Already Peaked?
Tesla’s recent profit margins make the EV leader look untouchable. But some market analysts are sounding alarm bells about the company’s profitability.
Tesla’s corner of the auto market remains small compared to the companies that built their success on the internal combustion engine (ICE) like Toyota, Volkswagen, and Ford. With investments flooding in, its potential for growth seems enormous.
Outside influences slashing Tesla’s profits
The success of Tesla alone isn’t the thing making the news right now—it’s the company’s first-quarter profits compared to legacy automakers that has people talking.
Despite having to deal with the same supply chain issues as older automakers, Tesla managed to
break its own records
for product deliveries and profits in the first three months of 2022. Reuters
says its 32.9% margin was more than twice that of brands like Ford, GM, and Stellantis.But the company still has its limitations. Its goal to produce an EV with a $25,000 starting price keeps getting pushed back as commodity prices and development costs continue to make its cars more expensive to build and own.
So far,
higher prices
haven’t slowed demand for Tesla’s vehicles, but they could soon reach a tipping point as inflation continues to make life more expensive around the globe.Tesla’s production ramp-up won’t be easy
Weathering the current economic storm won’t be a simple undertaking. Maintaining demand and investor interest will hinge on Tesla’s ability to speed up production, a project that doesn’t come cheap.
The
Gigafactory in Germany
will help once cars start popping out of the assembly line at plant-capacity, but until then, the facility could cost Tesla more than it makes. The same is true of the facility upgrades happening in Austin, Texas.Production levels will also rely on Tesla’s ability to get their hands on materials.
Microchips continue to be in short supply, and prices for battery components like cobalt and lithium continue to rise, causing Musk & Co. to think about
securing their own access to mines
—another cost for the company to incur. Will Teslas ever be affordable?
Any tech-savvy driver with modest means might be feeling baited by Tesla’s promise to offer a car for less than $30,000 at this point.
The closest the company came to keeping its word came at the beginning of 2020, when the Tesla Model 3’s starting price dropped to $35,000. Since then, the cost of the car has increased by over $13,000.
Car insurance
continues to be a thorn in the brand’s side as well, with average rates for a Model 3 sitting at almost $2,000 a year. But if you manage to get your hands on a Tesla or want to save on coverage for the Tesla you already own, shopping for car insurance with Jerry is a good idea.
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