Tesla’s Lackluster Phase Could Be Temporary, Says Bullish Analyst

Tesla, Inc. (NASDAQ:S.L.A shares have been trading in a range since the pullback that followed the release of the electric vehicle maker’s second-quarter results on July 19. Bullish analyst Dan Ives, however, isn’t losing sleep over the current lackluster phase.

UAW Strike Win-Win For Tesla: There’s a minimal possibility of Tesla employees demanding more pay or clamoring for unionization in the wake of the United Auto Workers’ union strike that has brought operations standstill at the Detroit big three,” said Ives in an interview with CNBC on Tuesday.

“It’s a win-win situation for Tesla, given the likelihood of the Detroit automakers passing on the higher costs to the consumers in the eventuality of a deal with the UAW this is a gut punch for [Mary] Barra and [Jim] Farley,” said the analyst.

He suggested that if General Motors Corp. (NYSE:GM), Ford Motor Co. (NYSE:), and Stellantis N.V. (NYSE STLA) took the UAW deal, it would essentially impair their business models for the next decade.

“These automakers will be up against a non-union Tesla, non-union Rivian Automotive, Inc. (NASDAQ RVIN), and foreign automakers”, said Ives.

Is Demand A Problem? “Tesla should be able to absorb the excess inventory by the fourth quarter, the 1.8-million-unit delivery target for the year is a super strong number when weighed against the environment in the forth quarter,” said Ives.  

“In China, Tesla is starting to gain market share, that’s why in our view, this is more what I view as the pause into the next phase of the Tesla growth story … which is why we’ve been telling our investors to continue to hold this name,” said the investor.

Tesla Pursuing Right Strategy: “Demand has definitely softened, as is seen in China, where companies are resorting to price cuts. The Poker move of cutting prices was the right thing to do, as seen in terms of the stimuli in demand for Tesla”, said Ives.

The analyst conceded that Tesla is going through a transition in terms of demand in the U.S. and globally. Going by Tesla’s scale of production, he added that Tesla could see deliveries and production of 2.5 million-3 million units over the next two years. He sees the current period as the middle phase of the next phase of the Tesla growth story.

Chinese Rivalry: Delving into competition from Chinese automakers, especially BYD Company Ltd. (OTC:BYDDY) (OTC:BYDDF), Nio, Inc. (NYSE:NIO), XPeng, Inc. (NASDAQ:XPEV), “this is like an arms race and a Game of Thrones going on. Tesla has an edge in terms of its ability to expand its manufacturing footprint and what it can do in terms of price perspective”, said Ives.

The analyst also noted that Chinese consumers, especially in the high-end and rising middle class, want Tesla, but it would become an issue if the Chinese EV makers came into the U.S.

Tesla Not Merely An Auto Company: Ives is of the view CEO Elon Musk will introduce a sub-$30,000 EV by the end of next year. “Plus with Cyber truck, and that’s why I just view this is in the early days, with supercharger in the sum-of-the-parts. This is not an auto company, this is a disruptive technology company. That’s why we are buying here,” said Ives.

Tesla ended Tuesday’s session down 2.02% at $246.53.

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Edited by Debrah and Newsdesk Manager