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Tesla records record deliveries; concerns grow over EV demand after tax credits

Tesla reported record quarterly deliveries Thursday. However, concerns that the U.S. Tax Credit for EVs will expire soon and turn a rush into a trickle weighed down its shares.

Elon Musk's carmaker, which is led by Elon Musk, went all-in to boost sales prior to the removal of the $7.500 federal tax credit. They used a combination discounts, financing offers, social media ads, and emails from customers.

"I am skeptical that this will last and I believe we could have a couple of soft quarters," said Elliot Johnson. He is the chief investment officer for Evolve ETFs which manages Tesla investments.

Johnson explained that the sales spike was due to a pull-forward of demand to lock in incentives rather than a growing consumer interest. He added it wouldn't be irrational to investors to "sell news" and purchase again next year.

Tesla shares fell 3.4% during afternoon trading. Stocks have been rising recently, up 14% in the last year at Wednesday's closing. This is after Musk's pay package was proposed by the board.

Tesla and its competitors received government credits to use them in attractive leases. Tesla is now offering leases after the credits expire.

Lease prices are rising

Tesla offers a credit for its vehicles. Tesla's prices, excluding credit, remain unchanged.

The company announced on Thursday that it had delivered 497.099 vehicles in the three-month period ended September. This is up 7.4% compared to 462,890 vehicles a year ago, and far above the expectations of Wall Street, which was for 443,919 cars.

Model 3 compact sedans, as well as its most popular Model Y crossovers, accounted for 481,166 of the deliveries. The automaker will report its quarterly results on Tuesday, October 22.

According to Troy Teslike an independent Tesla researcher, the strong demand for the refreshed Model Y has helped boost sales in China.

In September, it began delivering the six seat Model Y L to China. This family-oriented variant is designed to boost demand in the largest EV market in the world.

Europe, on the other hand, was a weak point as competitors aggressively promoted plug in hybrids. Meanwhile, Chinese EV brands began gaining ground on a hyper-competitive marketplace.

According to the Automobile Manufacturers' Association of the region, the company's European sales in August fell by 22.5% compared to a year ago, reducing its market share from 2.5% to just 1.5%.

Visible Alpha projects that Tesla will deliver 1.61 million vehicles in 2025, which is roughly 10% less than 2024. Tesla must deliver 389.498 vehicles during the December quarter in order to meet this projection.

Rivian, a smaller competitor, lowered its midpoint forecast for annual deliveries on Thursday, but exceeded estimates for quarter-end deliveries due to an increase in demand by buyers eager to take advantage tax credits.

MUSK AND TESLA

Musk's wealth is largely derived from his Tesla holdings. A recent rise in the stock price of the company helped him surpass the $500 billion mark Wednesday. This boosted his position as the richest person on the planet.

The board of directors has proposed that shareholders vote on a new award for the CEO. This could give Musk 12% ownership in the company worth up to $1 trillion if certain performance and valuation goals are met. These include delivering 20,000,000 vehicles within a 10 year period.

The billionaire has positioned Tesla as more of a technology company rather than an EV manufacturer by focusing on AI based self-driving system, robotaxis, and humanoid robotics.

Cheaper Models

Tesla has delayed the launch of the Model Y, a lower-cost variant, in the U.S. by several months. The plan is to eventually build the variants in China and Europe.

Tesla announced in June that the company had built "first builds" but that they would begin selling the vehicles in the fourth quarter, and increase production slower than expected.

Analysts say that Tesla's ability cushion a slowdown after the credit crunch will be heavily dependent on its push to lower-priced model.

Matt Britzman is a senior equity analyst at Hargreaves Lansdown and personally owns Tesla stock.

Sources told us earlier this year that the stripped-down model is intended to be about 20% cheaper to manufacture than the refreshed Model Y. It could scale up to around 250,000 units a month in the U.S.

(source: Reuters)