Why Tesla is EXPLODING | Tesla Stock

let's talk a Tesla first of all I hate

to say it but when Elon Musk starts

complaining about the Federal Reserve on

Twitter let's just say it's always been

followed by a poor stock performance and

what was Elon Musk doing yesterday he

was complaining about the Federal

Reserve on Twitter and how they need to

lower rates by 50 basis points however

as a long-term holder of Tesla my bias

exposed perhaps that'll create some more

buying opportunities but that's also

predicated on having more cash to buy

with but anyway let's talk about what

Morgan Stanley in the Wall Street

Journal just had to say about Tesla and

how that could impact Tesla versus the

competition here we go the Wall Street

Journal Elon Musk cost cutting targets

at Tesla pressure EV Rivals now I love

hearing that because everybody keeps

talking about how fantastic of an idea

it is that uh basically uh EVS are going

to have so much competition and Tesla's

going to be screwed because there'll be

so much competition part of that is

predicated on this this concept that oh

well all the other competitors are going

to come out with a cheaper car and then

Tesla's going to be screwed okay well

let's talk about that because what do we

have over here first of all uh the Wall

Street Journal dives into this idea that

Elon musk's new efforts of trying to cut

costs by potentially 50 percent for a

future release of a model 2 quote

ratchets up the pressure on traditional

automaker says here a managering

director of a consulting firm in the

Auto industry interviewed by The Wall

Street Journal and what's fascinating to

me is how this article Dives right into

Volkswagen and a UBS analyst where

Patrick Huber referred to Tesla's cost

cutting plans in asking Volkswagen

officials about their EV ID3 and that's

because Volkswagen just on Tuesday had

uh today just had an event

where they talked about uh the the

various different uh future plans for

Volkswagen and in questioning the

individual asks hey so y'all want to cut

prices but the reality is right now your

ID3 electric vehicle barely sells above

its Breakeven level how do you actually

expect to make money with an even really

cheaper priced car in fact he says I

really struggle to see how Volkswagen is

going to have an affordable electric

vehicle that's profitable to you in a

couple years time the response

that competition will become tougher so

we will try to stay as fixed as possible

on the overhead side of cost

I could do that because I was born in

Germany okay but anyway uh uh they even

have significant scale by Zen referring

to their 25 000 Euro vehicle concept car

from 2025 or that should be out at 2025.

now let me just say this

how do you expect to get to scale on a

car you haven't actually manufactured

yet if there's one thing we've learned

is you start manufacturing a car first

and then you get to more scale what

Volkswagen is trying to say is hey don't

worry we're go in two years the scale of

our production will be so amazing for

our break even ID3 that we'll be able to

produce a car that's about 40 percent

less expensive because we'll finally

have figured out how to not operate a

money losing business

I don't buy that at all I think that

sounds like a horrible idea and I don't

think they're going anywhere but okay

we'll keep going here

so uh you've got here caresoft Global

which tears apart vehicles to Compare

costs between competitors and estimates

that Tesla's model y could have about a

three thousand dollar cost advantage to

a competitor's comparable offerings not

even including batteries and that's

today even if Elon Musk is unsuccessful

at reaching a 50 reduction in costs

industry observers say any significant

effort towards the goal would be

meaningful at basically cementing

Tesla's lead above its competitors

okay fascinating the rest of the

industry is going to stand up and notice

now the the uh Wall Street Journal then

jumps on over from basically going from

this idea of Volkswagen actually thinks

they're going to go from near breakevens

to profitable on a car that costs 40

percent less money good luck to them in

the meantime Tesla's uh already got cost

advantages today and on top of that are

trending towards even better cost

advantages and so then what do they do

they compare to Ford they compare to

Ford and they say Mr Farley often cites

Tesla at having a more than ten thousand

dollar vehicle cost Advantage per car

greater than that three thousand dollars

it's getting even worse for the Legacy

auto uh and what I think is great about

Mr Farley is I think he really realizes

where the money is to be made and where

money is not to be made and one of the

things that I think is incredible is his

blatant basically admission of how

behind four is now some of you might

remember this from the Q4 earnings call

I think it's worth bringing up again

because we're about to go into a Morgan

Stanley piece and in the Morgan Stanley

piece we have some potential negative

news that we need to cover of course we

could always balance out negative news

by reminding you about the coupon that

expires tomorrow prices go up you get

the guaranteed best price you get

lifetime access to those course member

live streams uh and all the new content

that gets added

so but what do we have here uh Jim

Farley makes it very clear that they as

well are not profitable on EVS they're

not expecting to be profitable on EVS

until

2026. they also realize they have to go

through many more Cycles to understand

uh how not to waste an extra mile of

cabling on their products when they

actually manufacture a car and while

they figure out how to actually get to

profitability they also realize the

place to make money isn't actually on

the car itself but on software you might

remember me playing this clip of Jim

Farley going but our new fully updated

electric architecture is basically where

we want to focus because we've learned

on Pro what we've learned on Pro is we

can make real money on software he says

it kind of a little bit creepily but the

point is they're dreaming to be Tesla

that's the point is the competitors are

dreaming to be Tesla and basically the

Wall Street Journal is making fun of

them here they're making fun of

Volkswagen and they're making fun of

Ford by showing they're not even close

now look even GM suggests our aim is to

have industry leading margins they don't

they don't break out what their margins

are because they're probably so

miserable so for GM and Volkswagen

they're not competitors to Tesla now

there is a risk factor though and Morgan

Stanley believes the risk factor despite

having a 220 price Target on Tesla and

holding an over rate rating for the

stock which means they lack it

uh they believe that EV price cuts are

not a fad but instead are a trend uh and

they think basically more price cuts are

going to come and that investors should

anticipate further price Cuts even uh if

basically Tesla isn't the one cutting

see they say here one of the reasons

analysts believe prices will continue to

drop is competition if Tesla doesn't cut

prices someone else will that's Morgan

Stanley's take I actually completely

disagree I completely disagree with this

so why do I disagree well I believe that

the entire industry doesn't have any

room to cut prices anymore byd takes

three percent to net Tesla takes 17 to

net on electric well that's actually the

entire business for both of those

companies then when you look at four GM

and Volkswagen they're basically all

losing money on their EVS how can the

rest of the industry cut prices they

can't be a price leader because they

have no PP they have no pricing power

they don't control price who controls

price Tesla does as soon as Tesla cut

what happened

Neo byd dealerships uh Volkswagen Ford

GM all of them cut prices they didn't

cut prices first because they don't they

can't

Tesla did so I actually disagree that

even if others uh even if Tesla doesn't

drop prices others will and then that'll

somehow subsequently lead Tesla cut

prices I don't see that but maybe now in

response to commodity Steve my boy Steve

over here uh this is the only person

that my son knows because he knows that

Steve likes gold like Steve from

Minecraft

Steve says Volkswagen is spending 190

180 to 190 billion on battery plants and

securing raw material supply over the

next five years that's a huge amount of

money what will hurt Volkswagen is

higher energy prices in Germany due to

no more natural gas from Russia the raw

material price of battery Metals is not

going to drop between now and 2026. it

will stay roughly flat or increase I

think increase well

fairness Steve is all in on the comms

all in on the commodities

I'm not I don't think Commodities

actually have pricing power but I got

this for you Steve I did I I had to do

it man I had to do it I had to do it

Morgan Stanley and the Reuters piece

here falling lithium prices have also

contributed to price Cuts spot prices

for China's lithium carbonate have

fallen sharply to just below 40K a ton

as the latest status shows China's

battery production is still still

significantly exceeds installations in

other words a glut of battery supply uh

is sort of building up and that is

because to some degree EV demand is

slowing so we are actually seeing some

of that slowing start affecting

commodity prices I personally am of the

mindset that Commodities while they

might be necessary I think they have hit

as sort of a speculative bubble where

they have speculatively been ridden up

because people believe they're going to

be so necessary and I think that is

creating a little bit of a bubbling

there now don't get me wrong commodity

prices are still substantially higher

than where they have been in the past

but the point of this is not to

discredit Steve even though that would

be fun and I'll still have a beer with

Steve I understand commodity prices are

still higher and I respect Steve what's

worth first noting though is that this

is actually a very good thing who's it

who whom is this good for whom is this

good for it's actually good for EVS that

are still selling which would be like

Teslas right as it compared to like

Fords where your production line is

stuck

uh or GM even shut down their production

line for a period so whom is this good

for well it's good for EVS that are

still selling so that would be Tesla and

byd but who else is it good for well

it's also good for battery sellers like

Generac uh and and face when those

battery costs come down right so uh that

that is that's you know it's actually a

good thing uh so we are prepared for

Price Cuts uh to be an established

feature though says Morgan Stanley as

Supply demand continues to change we

would prepare for potentially lower

margins and that could potentially

create more opportunistic entry points

for the stock

huh okay that's where I have to actually

somewhat agree with Morgan Stanley while

I do not believe that uh uh you know

other EVS are going to drive pricing

cuts at Tesla I do think Morgan Stanley

is potentially correct in that yeah

maybe

maybe uh lower margins are going to be

coming and I think q1 is probably going

to hurt for Tesla and maybe that's why

Elon Musk to kind of Go full circle is

yapping about this idea of a 25 BP cut

the reason for that is I really think

that Elon uh well I mean we know this we

know he has a an early look on this we

know in the last earnings call the

expectation set was that margins could

go down to 20 but I don't think Wall

Street is convinced that we're going to

get 20 yet so I'm a little nervous for

that next earnings report

combining Elon Morgan Stanley and what

was said in the last earnings call I I'm

not short-term YOLO Tesla uh I do not

believe we're going to revisit the lows

we've had on Tesla

could we trade sideways and maybe test

out that you know around the ones I

don't know that we're gonna even break

170 if we do it wouldn't be that great

but 170 175 around those got some pretty

good support I just don't see us

escaping from that until after we get

past the the q1 era unless of course we

had an incredibly bullish fad tomorrow

which which is always a potential but uh

but but I remain I remain unconvinced

bottom line out of all of this

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bottom line

short term little bearish Elon uh

margins short-term bearish especially

through this next uh uh quarter report

which comes out in April probably around

4 20 actually actually I wonder if it's

scheduled that would be funny let's see

here Tesla earnings report date let's

see if uh oh missed opportunity 419 so

that's less than a month away we've

already got Tesla earnings coming up so

I think you're going to have a fear

trade going into Tesla earnings usually

Tesla stock trends down after earnings

uh and after events any kind of events

tend to push Tesla down lower as well

because well the events are just not as

juicy to to the broader Wall Street

Market they're due to see the long-term

investors they're fantastic for long

termers but in the short term events and

reports seem to be more negative than

positive so anyway uh 419 mark your

calendar for that I do actually think

that event actually these these falling

commodity prices will help but I don't

think they're falling quickly enough to

actually get Tesla back to higher

margins soon remember what they told us

in the last earnings call and the last

earnings call they said yeah probably

trending closer to 20 and then it'll

take us a few years to get back to 30

margins so they did set the expectations

but I personally think nobody really

paid attention to what they said in that

earnings call so I think there's uh

there's going to be a

a little oopsie doopsy there

um

so we'll see but yeah Elon asking for a

50 BP cut I think is a little bit of a

red flag too so again short-term bearish

long-term bullish I really don't think

the competition has pricing power uh or

or holds a candle but I'll I'll use it

as a a bite of the dip off after I

recorded this segment Kathy Wood

actually gave her perspective so let's

go ahead and play that for you now but

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got to ask you about Tesla Kathy um I

know it's you're one of your favorites

and your top Holdings still always a

Battleground the latest concern from

investors is about margins so so they've

been taking these price cuts which we

debated last time and even if that's

catalyzing demand at what costs is that

a reason for concern

well I think uh Tesla has an Elon Musk

in particular has said that he will pass

along any cost declines that uh that uh

Tesla is enjoying and I think that's

what's going on right now uh and uh I

think he's in a position to drive prices

down much more quickly than most other

manufacturers save for some in China and

I think there's deflation in Auto prices

taking place in China

I think Tesla LED that and byd followed

and so there's a deflationary tug there

which is actually going to accelerate

this shift from gas powered vehicles to

electric vehicles which is something

that Tesla wants so we think uh the the

the

mistaken assumption here is that Tesla

has to cut prices because of competition

uh Tesla we think can drive prices down

because its costs are moving down a

particularly battery and drivetrain

costs faster than most other

manufacturers so I think the key out of

what Kathy said while a lot of it is

similar to what I said maybe she was

watching me as I I'm just kidding I'm

not trying to

actually think that I think many people

can have a very similar opinion uh but

um

I think the key to what Kathy said here

is that Tesla is the leader and they can

drive those price reductions because

they are the leader

unfortunately though I do think we're

not a hundred percent at that level yet

that is even though Tesla is the leader

in pricing Cuts their margin will suffer

short term first and then in the long

run I think come back so I think um I

think right now Tesla if I were to you

know what maybe I can visually describe

this a little bit better I think Tesla

right now is shooting ahead of the

Running Deer uh and so that's a fancy

way of saying look if if this is a deer

right here there we go uh there it's got

horns I don't know do deers have horn

whatever so here's your deer uh and it's

running that way really fast you want to

point your gun depending on how far away

you are kind of like here right

something like that I don't know maybe

that's not the best uh

kind of radical whatever anyway you kind

of want to aim here so so in my opinion

this is a little bit of what you're

getting with Tesla so the way this would

work is drop prices cut prices to where

margins drop to 25 or to 20 from 25

then once you hit your target you get

the loot and you end up going back to 25

to 30 percent as your cost declines

actually catch up but I do think we

still have this period of Time ahead of

us but yes I I agree with Kathy Wood

otherwise I hope you enjoyed my dear

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