Tesla stock took a hit today after the company announced lower-than-expected delivery numbers. The EV maker reported 495,570 deliveries against expectations of 506,673. Even though the company only missed by just over 2%, the record deliveries posted by Chinese automakers make the performance look much worse than it actually is.
Chinese EV companies including NIO, XPeng, and Li Auto reported record delivery numbers for December. Their numbers were up 15% to 30% across the board. Even though some automakers missed their yearly targets, almost every company benefitted from a late-year surge in deliveries. For Tesla, this means increasing competition in the country, something that isn’t new for the US automaker. The company continues to struggle in the China market against local companies that are heavily subsidized by the Chinese government.
Investors would be glad to see that the stock is now reacting to business fundamentals rather than politics. This will help with price discovery though the recent rally means despite today’s dip, the stock is still quite high. At the same time, anyone willing to bet against Tesla will be wary of how Elon Musk influences the government once Donald Trump takes the oath.
Looking ahead into the year, one can expect Tesla to reduce prices, especially for its Model Y and Model 3, based primarily on battery technology improvement. We can also expect significant development in autonomy if Musk can force regulators to rethink their stance, especially in the context of the AI threat coming from China. We already covered how China’s advancement in road autonomy threatens US dominance. If that materializes, Tesla can say goodbye to its China business, something that has been the driver of its growth in the last few years.
According to Dan Ives, an analyst at Wedbush Securities, Tesla’s future will be determined by its lead in autonomy, not by delivery numbers. He believes delivery numbers are just 15% of the story now, the rest of it is autonomy. AI will continue to be a focus for US companies in 2025 and for Tesla, it will be no different. We’re bullish on Tesla’s ability to achieve a lead in autonomy, provided the regulators ease up the restrictions currently in place.
Tesla is 23rd on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 99 hedge fund portfolios held TSLA at the end of the third quarter which was 85 in the previous quarter. While we acknowledge the potential of TSLA as a leading investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
