Analysts at RBC Capital Markets Sound Alarm on EV Market’s Lack of Inflection Point
Analysts at RBC Capital Markets have raised concerns about the lack of an inflection point in the electric vehicle (EV) market, suggesting that the sector is still grappling with challenges. According to Tesla’s forecast for 2024, the growth rate is expected to be much slower than in 2023 due to worries about affordability and interest rates. Deliveries are projected to increase by a modest 14%, a sharp drop from the impressive 40% growth witnessed the previous year. To meet these projections, price reductions may need to be implemented, raising questions about the company’s profitability.
In contrast, Ford has announced a significant increase in its EV losses for the last quarter of 2023. The loss has soared to $1.57 billion from $1.329 billion in the previous quarter, surpassing earlier estimates for 2024. This downward trend highlights the challenges faced by both established automakers and pure play EV manufacturers.
However, the report indicates that legacy OEMs such as Stellantis and Ferrari may have an advantage over their purely electric counterparts. These legacy automakers are less exposed to the fixed costs and demand issues associated with EV production.
The report also suggests that the industry’s attention may shift towards Level 2+ autonomous driving efforts, with companies considering outsourcing instead of pursuing in-house autonomy solutions. Notably, the performance and adoption of autonomous driving systems like Mobileye SuperVision and Tesla’s Full Self-Driving (FSD) are deemed critical in this shift. In particular, a significant catalyst for Tesla’s stock could be price reductions for its FSD offering.
Lastly, the concerns surrounding inventory buildup among suppliers may be exaggerated, with the issue appearing more specific to Mobileye and not prevalent across the entire sector.
Analyst comment
Positive news: Legacy automakers, such as Stellantis and Ferrari, may have an advantage over pure play EV manufacturers.
Negative news: RBC Capital Markets raises concerns about the lack of an inflection point in the EV market, slower growth rate for Tesla, increased losses for Ford in EV sector.
Neutral news: Industry’s attention may shift towards Level 2+ autonomous driving, concerns about inventory buildup among suppliers.
Market analysis: The EV market is still grappling with challenges. Legacy automakers may have an advantage, but the overall market may face slower growth and profitability concerns. The industry may focus more on autonomous driving and outsourcing solutions.
