Tesla's shares though have lost 31% in a year and are giving back much of the gains from the pandemic period, when the price rose from $35 to nearly $400 per share:
China - more questions than answers
The United States intends to support the electric car trend, as confirmed by Joe Biden's recently signed 'Inflation Reduction Act'. It is still unclear whether the United States will embark on a path of heightened economic confrontation with China, but it seems likely in light of tensions over Taiwan. Trade regulations could hit Tesla's business. On the other hand, exposure to China was recently increased by the world's largest asset management fund, BlackRock which may indicate a still possible 'soft' end to tensions with the Middle Kingdom.
At the same time, delivery times for Tesla cars on the market in China are falling, which perhaps confirms that supply chains are improving visibly. However, it is still unclear whether this is definitely due to logistics and increased Tesla production or a slowdown in demand as suggested by the bears. The wait time for most models in China is now roughly a week. According to Reuters sources, Tesla has increased production capacity at its Shanghai gigafactory.
The market bar is still set high
According to Musk's declarations, Tesla is expected to solve 'Full Self-Driving' later this year and provide full auto-driving capabilities in selected models. The company is also to improve service capabilities and deploy an electric pickup truck (a competitor to the Rivian) called Cybertruck by the middle of next year. The company has also promised to ramp up battery production to 100 gigawatts of more than 4,600 batteries which would give it the ability to power more than 1 million vehicles. On the other hand, Musk's high-slung bar could prove a burden on Tesla's stock market valuation if it turns out that the company will not be able to live up to its pledges. Earlier in the year, Musk warned employees with a mailing with powerful concerns about the continued economic situation and cut the number of full-time jobs at the company, which then became a 'fashion' among US giants like Meta Platforms, Alphabet, Amazon and Netflix.
Sentiment around Tesla's stock will be saved by.... humanoid robots?
According to information obtained by Reuters, more and more business meetings at Tesla are about the production of Optimus robots, which Musk considered unnecessary just a few years ago because studies showed that humans do a range of jobs more efficiently. Today Tesla has a plan to deploy thousands of robots in factories, but Musk's current vision for the company is to have millions of them. Musk has indicated in the past that robots produced by the company would be in powerful demand in the individual market, and could take humans out of many activities like helping the elderly, mowing the lawn or helping in the kitchen.
Tesla will unveil a prototype of humanoid robots as early as Sept. 30 during 'Artificial Intelligence Day'. Musk still believes that production of the robots will begin as early as 2023. However, industry experts remain relatively skeptical about the 'instant revolution' of robots. Head of NASA's Robotics Team, Shaun Azimi stressed that even the production of self-driving cars has proven much more difficult than expected. Tesla's robots may showcase a selection of human-imitating skills, however, they are still likely to be far from what people would really expect from robots. Nancy Cook, an engineering professor at Arizona State University, also addressed the event, stressing that key to Optimus' success will be its ability to perform 'unscripted actions' (reactions, self-learning)
In order to succeed, Tesla will have to show robots performing many spontaneous, non-programmable actions which Nancy Cooke, professor of human systems engineering at Arizona State University, also emphasizes. Such proof could provide a boost to stock valuations, which have fallen more than 30% since the beginning of the year. If Tesla succeeds, we can even expect a change in the trend to an upward one, however.... If the robot turns out to be just a walking, dancing device performing simple tasks, it could have the opposite effect and, through disappointment, weaken sentiment and demand for the shares of a company whose innovation in the context of current market events could become its own bane;
Hope rests again on the shoulders of Elon Musk, who has already shown in the past that he can surprise skeptics by, among other things, creating SpaceX. Musk intends to use robots to carry heavy parts, and insists that the company's current production capacity can provide them cheaper:
Although the project of the Optimus humanoid robot (the so-called Tesla Bot), which could carry a powerful revolution of the labor market, affects people's imagination, it still seems an abstraction in the context of the current real challenges facing Elon Musk's company. The history of putting humanoid machines into production is much older, with Hyundai and Honda, among others, having attempted it in the past, but the machines had trouble reacting to unpredictable events, which caused significant problems. At the current stage of production, which has not yet started, treating the project as the company's next high-margin future business seems unjustified yet, and for this moment it can be put on one shelf with Elon Musk's other bold visions like hyperloop, among others. Recall that Musk at the "Autonomy" happening in 2019 pledged to deliver 1 million robots by 2020. At the same time, Jonathan Hurst, chief technology officer at humanoid robotics company Agility Robotics, points to the decelerating demand for the development of the technology, which is 'on the curve' in 2022. Source:Tesla
Tesla (TSLA.US) chart, D1 interval. The stock has weakened and is clearly slowing its upward trend. The 200-session moving average has been broken with a renewed drop below $300 per share which may herald strengthening supply. Since March 2020, the average has been a key support for Tesla, which has now become resistance. Fundamental indicators point to a significant overvaluation of the stock while it is supported by the company's high margins, surging sales and Elon Musk's media persona. However, it seems that a slowdown in car sales could significantly lower market expectations for Tesla's business, which is the fundamental reason for such a high valuation today. The price-to-book ratio is over 20, the price-to-earnings ratio around 99 points, which puts Tesla among the highest valued companies in the United States (5 times the average of companies in the NASDAQ index). The share price may retest the local June low near $205. Source: xStation5
