Bernstein reiterated an Underperform rating on Tesla (NASDAQ:TSLA) with a 12-month price target of $150.00 on the electric automaker’s stock following the company’s 3Q report and earnings call.
The automaker reported a disappointing 3Q with average COGS per car declining $2.5k from 39.2k in 3Q22 to $36.7k in 3Q23. Tesla bulls are holding on to their shares as they point to the company’s ability to structurally lower costs as a key competitive advantage.
However, following an analysis, Bernstein determined that Tesla's cost reductions this year may not be as substantial as they initially seem.
Approximately $2k of the $2.5k reduction is attributed to industry-wide influences that might not be replicated next year. This situation doesn't necessarily enhance Tesla's cost competitiveness in comparison to other EV manufacturers. Notably, other electric vehicle producers seem to be benefiting from similar cost advantages.
The analysis suggests that much of the reduction has been driven by reduced lithium prices (~$700/car), IRA tax production credits (~$460/car), a mix shift to the cheaper Model 3/Y (~$530/car), and cheaper trims within models ($430/car).
Though the precise impact of each of these cost drivers remains somewhat uncertain, Bernstein estimates that the remaining ~$400 per car reflects Tesla's true "structural cost reduction."
Analysts at Bernstein wrote in a note, “We continue to believe that Tesla is a car company, and that the competitive nature of the auto industry will make it difficult for any player to have a sustained cost or profitability advantage.”
Shares of TSLA are up 2.18% in pre-market trading Tuesday morning.