April 14, 2024 1:32 pm
RBC Capital places higher value on Tesla’s Full Self-Driving technology than its core car business

Tesla’s Autonomy Progress Has High Value for RBC Capital

RBC Capital has placed a high value on Tesla’s progress in autonomy, particularly in Full Self-Driving (FSD), over the company’s car business. Analyst Tom Narayan from RBC Capital believes that Tesla’s one-month free FSD trial could serve as a catalyst in the second quarter of 2024. He stated that the trial could potentially bring more customers into showrooms and increase the FSD attachment rate, ultimately leading to higher deliveries.

Narayan expressed that autonomy is more significant than Tesla’s car business and highlighted that the FSD free trial might play a crucial role in the Tesla investment thesis in the long term, especially following the Q1 delivery miss. Despite his positive outlook on Tesla, Narayan acknowledged that current sentiments towards the company are negative due to softer-than-expected deliveries.

In Q1 2024, Tesla experienced an 8.5% year-over-year decline in deliveries, totaling around 386,810 vehicles. The majority of deliveries comprised Tesla Model 3 and Model Y vehicles, accounting for 369,783 units. Other models like Cybertruck, Model S, and Model X accounted for 17,027 deliveries.

RBC Capital identified various factors that might have influenced Tesla’s Q1 deliveries, including factory shutdowns at Giga Berlin due to an arson attack, shipping challenges caused by the Red Sea conflict, and pre-buy activities in Q4 2023 before the expiration of tax credits for the Model 3 under IRA. Additionally, RBC Capital speculated on how an EV demand slowdown in the United States would affect Tesla’s deliveries.

Looking ahead, RBC Capital forecasts that by 2035, Tesla will sell approximately 2.5 million vehicles annually in North America alone and around one million units each year in Western Europe and China. The investment bank also predicts that by then, Model S will contribute around half a million units annually to sales figure while Model X will account for approximately two hundred thousand units sold annually once matured.

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