Elon Musk and Tesla power through regulatory, demand challenges

Tesla Inc. and its outspoken CEO, Elon Musk, went into this week’s earnings call on shaky ground.

The electric vehicle maker slashed prices across its lineup by up to 20 percent mid-January amid softening global demand and growing inventories. New revelations claimed Tesla faked a video promoting its driving-assistance software. And Musk faced his own legal troubles just before the call.

Musk testified earlier in the week in a shareholder lawsuit claiming he defrauded investors by posting on Twitter in 2018 that he had secured funding to take Tesla private. The deal never happened.

Separately, testimony this month by a Tesla engineer came to light alleging the automaker staged a 2016 video to promote its Autopilot driver-assistance software, which is at the center of regulatory probes.

Despite all that, Tesla and Musk emerged mostly unscathed from Wednesday’s fourth-quarter earnings call after beating fourth-quarter financial expectations and projecting strong growth for 2023. Tesla’s stock price surged 11 percent Thursday to $160.27 at close, up 48 percent so far this year.

The January vehicle price cuts juiced global demand to the point where orders are now running twice as fast as vehicle production, Musk said on the call.

“The most common question we’ve been getting from investors is about demand,” Musk said. “I want to put that concern to rest: Thus far in January, we’ve seen the strongest orders year to date ever.”

Tesla projected automotive gross margins above 20 percent, which eased analyst concerns that the price cuts could decimate profits. Musk also forecast up to 2 million in global sales this year — up from 1.3 million in 2022. Tesla’s official estimate for 2023 is 1.8 million.

“Despite our general caution on the EV market early in 2023, we make Tesla our new top tick in U.S. auto,” Morgan Stanley’s Adam Jonas said in a research note. Tesla, the firm said, is likely to win the price war. “We question whether competitors can keep up in this EV race.”

Other analysts echoed the bullish tone for Tesla, which already holds a 65 percent share of the U.S. EV market and newly qualifies for tax incentives of up to $7,500 per vehicle.

Adding up the price cut and full EV credit, Tesla’s top-selling Model Y is now about $20,000 less expensive for U.S. customers who qualify for the tax incentive.

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