Doubt Cast on Tesla’s (NASDAQ:TSLA) Production Capabilities

Doubt Cast on Tesla’s (NASDAQ:TSLA) Production Capabilities

Doubt Cast on Tesla’s (NASDAQ:TSLA) Production Capabilities

$TSLA, $AXL, $F, $GM, $MGA, $DLPH, $BWA, $RACE

The world’s top auto-parts suppliers do not buy the enthusiasm about the EV hyped by Tesla’s (NASDAQ:TSLA) hypemeister CEO Elon Musk.

Executives at 5 of the 25 biggest suppliers to automakers in North America have all downplayed this month expectations for EV sales.

After Volvo Car Group made a splash with its pledge to put electric motors in every new car by Y 2019 and Mr. Musk predicted more than half of US auto production would be electric in 10 years, the parts makers issued modest forecasts and spoken in uunabashed tones.

“There’s a lot of buzz and a lot of talk about how the world’s going to change to electrified vehicles overnight, and I’m here to tell you it’s not going to happen overnight, and it’s not going to happen for decades,” David Dauch, CEO of American Axle & Manufacturing Holdings Inc.(NYSE:AXL) , said Tuesday at a JPMorgan conference in New York. “I’m a strong believer in the internal combustion engine. I think it’s going to continue to be here for some time.”

America’s consumers have not demonstrated a willingness to buy EVs beyond the novelty aspect. Thus, giving both carmakers and their suppliers reason to be conservative.

At the same time, governments are beginning to demand cleaner cars to curb pollution in mega cities from Mumbai to Mexico City.

And we have seen investors inclined to reward those trying to transform transportation, with all-electric Tesla surpassing the likes of Ford Motor Co (NYSE: F). and General Motors Co (NYSE:GM) by market value this year.

Tesla shares are up 67% YTD.

We here at HeffX-LTN see Tesla with an enterprise value of $70-B and say NutZ, something is out of wack here.

Magna International Inc (NYSE:MGA), the top parts supplier in North America by sales, sees pure electric cars at less than 5  to 6% of global new vehicle deliveries by Y 2025. CEO Don Walker told an industry conference last week that automakers share his skepticism of faster market penetration, but do not say it publicly.

“They know what’s going to happen, but they have to say what is going to be popular to be perceived as a progressive company,” Mr. Walker said on 2 August at the Center for Automotive Research Management Briefing Seminars .

Magna and Delphi Automotive Plc (NYSE:DLPH) supply powertrains and electronics systems, see the wave forward being the hybrid engine. Delphi CEO Kevin Clark told investors at the JPMorgan conference this week that 95% of vehicles will still have combustion engines in Y 2025, and about 30% will have some form of gasoline-electric system, Ferrari (NYSE:RACE) has one already priced at $2.6-M each, and only 5% will be purely electric.

Price is a Key deterrent.

Battery-electric SUV (sport utility vehicles) in the US will not reach price parity with traditional gasoline engine-powered SUVs until maybe Y 2026.

For small cars, price parity will take until Y 2027 and longer in Europe.

BorgWarner Inc (NYSE:BWA) has made 2 acquisitions recently worth about $1.3-B to help develop products for electric powertrains, forecasts that 20% of vehicles will be hybrid or pure electric in Y 2023, with pure EVs being only 3% of sales. James Verrier, CEO of the maker of turbochargers, is skeptical of Mr. Musk’s prediction to state governors last month that more than 50% of US production will be electric in 10 years, that is simply not so.

The parts makers and supplier are a really good gauge of the future of EV growth in North America, and from what I am hearing and reading, 3% of the market is a reach, that in light of cheap Crude Oil and the development by Mazda of an ultra efficient gasoline powered engine.

Thinking people know Lithium-Ion batteries are expensive, volatile, and that the power that comes from plugging in to an electric socket comes for the most part coal fueled electric generation plants.

Symbol Last Trade Date Change Open High Low Volume
NASDAQ:TSLA 357.87 11 August 2017 2.47 356.97 361.26 353.62 4,365,700
HeffX-LTN Analysis for TSLA: Overall Short Intermediate Long
Bullish (0.37) Bullish (0.40) Neutral (0.23) Bullish (0.47)

Have a terrific weekend

 

 

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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