Recently, Deutsche Bank held its DB AutoTech Conference, which included talks with Tesla’s (TSLA) head of Investor Relations. Following the 2-day meetings, firm analyst Emmanuel Rosner believes that over the mid-term, Tesla’s “impressive trajectory for its battery technology, capacity and especially cost will continue to accelerate the world’s shift to electric vehicles and extend Tesla’s lead considerably.”
One of Rosner’s main takeaways from the conversations concerns Tesla’s cost advantage. The analyst thinks that possibly the “most important metric” in an EV maker’s P&L (profit and loss), is average COGS (cost of goods sold) per vehicle.
Tesla has done good work on this front. In 3Q18, its average cost per vehicle stood at $54,000 and 3 years later in 3Q21 this dropped to $36,000 per vehicle, amounting to a COGS reduction of $18,000 over the period. Hardly any of this drop has been due to lower cost of battery cells with the Price/Kwh “broadly stable” during this time.
Rosner counts “design improvements, more efficient factories, production ramp at full speed, better material sourcing, localized supply chain and labor hour reductions” as reasons why the cost came down. “All this work hasn’t even been started by EV competitors,” the analyst added.
Talking about the competition, 2021 has seen a fundamental shift in the way consumers view EVs. The result of which has been a “large gap between supply and demand.” The backlog for Tesla’s products, for example, is now between 7-14 months.
In the race for EV dominance, Rosner sees those who have enough capacity and can “secure enough supply to produce vehicles as fast as possible and offer them at the best cost,” as the likely winners, and Tesla feels it has a “considerable lead” on this front.
Rosner does not put up an argument with this statement, saying Tesla’s competitive advantage is due to its efforts to “secure supply, vertically integrate, and reduce costs.” Not only does the company source around 27% of all cells in the auto industry, it also designs a large amount of its own semiconductors, including chips utilized in power electronics.
To this end, Rosner maintained a Buy rating on TSLA shares along with a $1,000 price target. (To watch Rosner’s track record, click here)
Over the past 3 months, 26 analysts have reviewed Tesla’s prospects, of which 13 say Buy, 7 advise to Hold and 6 implore to Sell, all coalescing to a Moderate Buy consensus rating. The forecast calls for modest upside of 3%, given the average price target currently stands at $985.64. (See TSLA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
