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‘There’s a method to the madness,’ analyst says

There’s a tug of war between Tesla (TSLA) bulls and bears on Wall Street.

Tesla reported an earnings beat for Q3, but a revenue miss, reflecting a concern among some that demand might be coming down a bit for its premium electric vehicles.

Tesla bulls contend that CEO Elon Musk said challenges to physical delivery of vehicles to customers was a main bottleneck – and why the number of cars produced in Q3 was significantly higher than deliveries.

“In fact, we’re just fundamentally running out of – there weren’t enough boats, there weren’t enough trains, there weren’t enough car carriers to actually support the wave because it got too big,” Musk said on the earnings call. “So, whether we like it or not, we actually have to smooth out the delivery of cars intra-quarter because there aren’t just enough transportation objects to move them around.”

At the same time, Musk warned about demand issues stemming from China’s property market headwinds, Europe in the midst of an energy-driven recession, and the effects of the Fed’s tightening cycle on the US economy.

Hong Kong, China, 13 Sept 2022, A red Tesla car passes in front of a Tesla dealership in Wanchai.  (Photo by Marc Fernandes / NurPhoto via Getty Images)

Hong Kong, China, 13 Sept 2022, A red Tesla car passes in front of a Tesla dealership in Wanchai. (Photo by Marc Fernandes / NurPhoto via Getty Images)

“There is a bit of doublespeak,” George Gianarikas, Canaccord Genuity managing director, told Yahoo Finance. “Elon Musk acknowledged that there was a demand issue, particularly in China… but at the same time he said the company would grow significantly in Q4.”

“There’s method to the madness and there’s logic as to why [Musk] guided them to grow so significantly this year and continue growth into next year, but I completely agree and understand that there are too many breadcrumbs that indicate that there has been a slowdown in demand, and he even acknowledged it on yesterday’s call, “Gianarikas said .

On the positive site, Gianarikas believes the backlog of orders, demand for new EVs in general, fleet sales, and the coming production of the Cybertruck in 2023, and more Tesla Semi sales will boost Tesla in the near future, despite some economic uncertainty.

“We think they could do about 450,000 deliveries [in Q4]; they’re going to sell as many cars as they can build for the foreseeable future which is about 50% year over year growth as fast as the eye can see, ”Gianarikas said about the Canaccord team’s forecast for Tesla’s performance.

Another area of ​​future development for Tesla that has Gianarikas excited for growth is the “next-generation” vehicle as Musk called, which would be smaller in size, and costs Tesla 50% of what the Model 3 / Y platform takes to build. This vehicle would likely be the “robotaxi” that Musk has mentioned in the past.

“On the robotaxi platform, it’s a really interesting question – the company’s ability to bring down the cost of production per vehicle – they’ve done a really, really marvelous job on the Model 3 / Model Y platform which costs in the mid-30,000 range to make, ”Gianarikas says. “When it comes to robotaxi, that’s another step down in production costs … it’s another platform through which the company can reduce costs, and help EVs proliferate the globe.”

Pras Subramanian is a reporter for Yahoo Finance. You can follow him on Twitter and on Instagram.

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