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Since peaking in 2021, Tesla (TSLA -0. 20%) has struggled to build much, if any, momentum. Once above $400 per share, the stock has taken a beating over the past three years and currently sits at around $185.
While those who invested before 2021 will likely enjoy large profits, those who invested more recently may not be so lucky. Perhaps Tesla’s most productive days are already over, which begs the question: has it been too long to invest in Tesla?
Tesla’s stock decline can largely be attributed to declining gross profit margins. At its peak, Tesla’s margins were over 30%, making it by far the most productive in the entire auto industry. Today, those margins have fallen to 17%, which, while still near its peak, is now facing a number of pressures.
The reasons for this decline are varied, but can be summarized as a relief in customer demand for electric cars (EV). Rising interest rates have deterred potential buyers due to the emerging costs of financing a vehicle. In an attempt to stimulate demand because Tesla has to reduce its costs in 2023. This, combined with higher costs in the supply chains and in the labor markets, has led to a drop in margins.
However, interest rates will eventually fall and demand for electric vehicles will likely recover, as such issues are generally cyclical. Current terms recommend that rates could finally begin to decline by the end of the year. Naturally, as loans become cheaper, consumer demand for electric vehicles is expected to rebound.
In addition, Tesla is expected to take advantage of the overall trend of EV adoption across the globe. Governments are implementing stricter emissions regulations and offering incentives to inspire EV procurement, creating a favorable environment for Tesla’s long-term growth.
In addition, the company is expanding worldwide with the current structure of a factory in Mexico and plans to expand to India and Thailand in the coming years.
Tesla is heading for more than just an electric vehicle company. One of its main efforts in recent times is to build self-driving cars and, eventually, launch a robotic taxi business. Tesla’s generation of autonomous vehicles has made significant strides, and the company is gearing up for a global demonstration of its robotaxi on Aug. 8.
In addition to autonomous vehicles, Tesla is also preparing its humanoid robot, Optimus, for market launch, which is expected to take place in 2025. While those efforts are not yet in a position to be commercialized on a large scale, Tesla has made remarkable strides. . . Optimus is in a position that is used in Tesla’s factories, demonstrating its potential to empower and reduce hard labor costs in all types of industries.
Critics will point out that Tesla and deadlines don’t go well together. But it’s hard to fight his ability to hold on. If Tesla can mirror similar degrees of bad fortune with his and Optimus’s robotaxis as with their electric vehicles, he may simply reshape the company and perhaps even society for the better.
While it is difficult to measure the true financial effect of those two inventions simply because there is no such market for those types of products, some estimates put the total profit of robotaxis at $700 billion a year and that of Optimus at approximately $1 billion. Combined, and if that’s accurate, it means the two can triple Tesla’s existing profits.
At the risk of being optimistic, I assert that Tesla’s peak productive days are yet to come and that it is not too long ago to invest in one of the most transformative corporations of the future. So far, Tesla’s ability to innovate and overcome the barriers of the generation has been one of the main points of its success. If it can continue to dominate the EV market while effectively expanding into new spaces like self-driving cars and robotics, the company could reach even greater heights.
R. J. Fulton holds positions in Tesla. The Motley Fool ranks and recommends Tesla. The Motley Fool has a disclosure policy.
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