Tesla has tried to make it seem like the company has a supply problem. That it isn’t making enough cars. I don’t think that’s what’s happening here. I think the problem is that Tesla is making too many cars. Given that the company is throwing big discounts out there on the Model Y, I think I’m right.
You know what other car company is probably overproducing one model? Dodge. The perennially oversupplied Hornet is, yet again, one of the cars atop the list of cars that are moving slowly.
There’s been a lot of hubbub over Tesla maybe canceling its small car, and Tesla’s original CEO says that’s a ‘shame’ if it’s true.
And, finally, maybe GM’s Cruise robotaxis are going to be back on the road, just not in California.
Tesla Discounts Model Y By Up To $5,000 As Inventory Increases 1,117.5%
We noted that, in Q1, Tesla managed to get its EV sales crown back from Chinese automaker BYD. We also noted that part of this was due to Tesla’s sales falling less.
At the time, Tesla blamed arson and production lags for the downturn. Specifically, Tesla said:
Decline in volumes was partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin.
Was it, though? I mentioned last week that I was a little skeptical and now I’m Columbo-at-th-end-of-an-episode-of-Columbo skeptical.
Let’s look at the numbers, first, via Tesla-tracking site Tesla Info, which has this helpful graph:
The greenish line is Tesla Model Y global availability, which is up 883.5% year-over-year according to Tesla Info, with 8,803 Model Ys in global inventory. In the United States, the numbers are worse, with inventory up more than 1,000% year-over-year, and 76.3% quarter-over-quarter.
If demand was strong for the Model Y then, one would expect, inventory would follow normal seasonal fluctuations. If there was a new Model Y, maybe, some adjustment would be expected.
None of that is happening. There’s just more of them.
So Tesla is doing what any rational car company would do and is offering more than $5,000 off of existing Model Y inventory. You can go search for yourself. As you can see in the screenshot above, a Model Y AWD Performance is getting $5,450 on the hood, bringing down the price close to $40k after a federal tax credit.
If you want a super good deal, the base Model Y RWD is about $4,700 off for certain models, which is under $35,000 when the tax credit is in play. That’s a great deal. A Model Y is not the EV that I want, but if I was in the market right now for an EV it’s hard to argue with the price.
It’s not clear how much of this is price sensitivity, overproduction, people not liking Elon Musk, increased competition, et cetera. It’s probably some mix, but producing Model Ys as this clip doesn’t make sense to me.
I’m not alone in this opinion.
My old pal Craig Trudell over at Bloomberg has some good analyst commentary backing up the same:
The difference between the number of vehicles Tesla built and sold in the quarter “dispels the notion that 1Q deliveries were somehow supply rather than demand constrained,” Ryan Brinkman, a JPMorgan Chase & Co. analyst who has the equivalent of a sell rating on Tesla stock, wrote in an April 3 report.
Brinkman cut his price target for the shares to $115 from $130 and lowered estimates for first-quarter revenue and earnings per share. He now projects Tesla will report a $1.3 billion free cash outflow, rather than a more than $300 million inflow, due to an expected record increase in finished goods inventory.
The Model Y is aging, it needs to be updated, even at $35k it’s still pricey. Was the Cybertruck worth it? Would Tesla be better off with an updated Model Y?
America Has A 443-Day Supply Of Dodge Hornets
The Dodge Hornet is also one of those vehicles I think is overproduced but, unlike the Model Y, I think it’s likely overpriced.
As previously reported, the Dodge Hornet is a troubled vehicle that fits awkwardly in the current Dodge lineup. There’s a PHEV version, which is neat, but the car has long had a difficult time finding its footing.
Is there some good news for Stellantis? Sales in Q1 of 2024 were up to 7,419 models, which is an improvement over the just-shy-of-5,000 Hornets sold in Q4 of 2023. In December, I pointed out that, according to the monthly Car Edge list of fastest/slowing selling cars, there was a 517-day supply of Hornets.
According to the April update, there’s only a 443-day supply of Hornets. That’s an improvement! The average selling price is also slightly up, though this might not be reflected in the actual transaction price.
What else is moving slowly? A lot of Stellantis products, as per usual. The Mach-E remains on the list, in spite of improving sales and discounting. The x2 is being rolled out to BMW dealers, so this might be a temporary condition as old models are being pushed out and new ones arrive.
The Audi SQ8 is probably a reflection both of the vehicle’s price/age and, I think, the fact that Car Edge lumps in the e-tron EV models.
Martin Eberhard Calls Cancellation Rumors A ‘Shame’
If you weren’t paying attention to the car industry in the mid-aughts you might get the impression that Elon Musk created Tesla and was the company’s first CEO. He did not and was not, although he deserves a lot of recognition for morphing the company into what it is today.
The original CEO was actually Martin Eberhard. He doesn’t seem to be directly involved with Tesla at the moment, but he’s got thoughts.
Martin Eberhard was speaking at the HSBC Global Investment Summit in Hong Kong. On Friday, Reuters reported that Tesla was cancelling its long-promised inexpensive car that investors had been counting on to drive growth.
The decision represents an abandonment of a longstanding goal that Tesla chief Elon Musk has often characterized as its primary mission: affordable electric cars for the masses. His first “master plan” for the company in 2006 called for manufacturing luxury models first, then using the profit to finance a “low cost family car”.“We’ve both read in the news, Tesla delaying or eliminating their low-end Model 2 programme, which is a shame for them, but it’s a sign that China has a chance to really spread there,” Eberhard said.
Cruise Might Be Back In Phoenix
GM’s Cruise robotaxi unit is damaged goods at the moment as the company tries to recover from a series of incidents capped off with the dragging of a pedestrian in San Francisco.
The company chose to suspend all of its robotaxis in the United States following the incident, but the company is reportedly trying to get back into the game according to a Bloomberg report, via Automotive News:
The company is set to announce and begin the testing as early as Tuesday, according to two people with knowledge of the matter. In recent months, Cruise has been in talks with officials in 20 metropolitan areas where it previously ran cars or had started mapping in preparation to run them. Phoenix is a natural place to start as Cruise already has vehicles in the area and city officials were open to the idea of its return, said one of the people, who asked not to be named as the plan isn’t public.
Cruise spokesman Pat Morrissey said in an email that the company “had not set a timeline for deployment. We are in the process of meeting with officials in select markets to gather information, share updates and rebuild trust.”
That seems quick to me, so we’ll see if something is announced today.
What I’m Listening To While Doing TMD
Jeff Buckley can almost exclusively be enjoyed posthumously because he died tragically young of a freak swimming accident. This is such a jam and yet, still, tinged with the bitter taste of what could have been.
The Big Question
Will Tesla just, like, keep making Model Ys? How much discounting will Tesla have to do in order to correct this issue?
Psssst, Psssst…..it’s NOT an over supply. These cars are priced to more than people can reasonably afford. The average wage is about 45k. Unless you want to sleep in your car, any reasonable person that doesn’t want to end up sleeping IN the car, just can’t buy them.
You’re looking at over $700 a month for a 40k car payment on a 5-year note at 7%. You would have to put in $10,000 to bring that payment into the $600 range. If you want to make it a little bit more manageable, you’d have to put in 20 grand, that would get you into the $400 a month range. Of course this is if you want to buy a car. It can be cheaper if you lease the car but in my book I’ve never done it and I never will.
Jeff Buckley = GOAT
Cruise going to AZ makes sense given Arizona has already lost at least one person to self-driving tech, so what’s a few more?
50% of the top 10 slowest selling vehicles being Stellantis makes me wonder:
* why?
* why do they bother with all those makes in the US? Why is RAM a brand?
* what happens to cars that remain unsold? Do they get disassembled for parts? Dealership loaners? Crushed? Donated?
The remaining ones get sold off one by one over the years so that Torch Junior can write an article entitled “Who Bought a Dodge Hornet in 2042, Three Years After It Was Discontinued?”.
The $25,000 electric vehicle was cancelled because, apparently, the Model Y will soon sell for 25 grand, at the rate that discounts are being applied.
Too be the sales leader you need units to sell and an attractive price to lure people in. Duh. Elon makes scrooge mcduck look like he is homeless. He wants press anointing him a God. So have tons of supply and sell cheap and win.
BTW for investors, this will tank share prices not help them unless you have delusional fans. Any stock guy making predictions on Tesla stock is an idiot. Other than stay away any advice is not good.