Tesla Keeps on Growing as the Model Y Hits Europe Earlier Than Expected

2 months ago 20
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A Tesla Model Y.

Courtesy Tesla

Tesla has started delivering its Model Y crossover vehicle in Europe, a little sooner than investors might have expected. That is a bit of good news for Tesla bulls.

The bigger deal over the longer term, however, is product-line expansion. Tesla continues to offer more electric vehicles, in more markets, which it needs to do to hit its aggressive growth goals.

The EV news outlet Electrek spotted the Model Ys in Europe recently and confirmed delivery earlier this week. Tesla (ticker: TSLA) didn’t immediately respond to a request for comment about Model Ys being delivered in Europe.

The original plan for Tesla was to deliver European Model Ys from the company’s Berlin plant, which is slated to be finished around October. Tesla, however, shipped some Model Ys from its Shanghai facility to meet early European demand.

“Initial deliveries will be at low volumes until the Berlin plant is completed,” wrote Deutsche Bank analyst Emmanuel Rosner in a Wednesday research note. “This still represents a considerable step forward for Tesla as it looks to scale volumes globally in the coming years.”

Tesla has big plans for the Model Y, which is already available in the U.S. and China. “When it comes to Model Y, we think Model Y will be the bestselling car or vehicle of any kind in the world and probably next year,” said CEO Elon Musk on the company’s first quarter 2021 earnings conference call. “So I’m not 100% certain next year, but I think it’s quite likely. I’d say more likely than not, that in 2022, Model Y is the bestselling car or truck of any kind in the world.”

Selling the vehicle in every large auto market around the world is key to reaching that goal. Geographic expansion is also critical for Tesla to achieve its goal of increasing its delivery volumes by 50% a year, on average, for the foreseeable future.

So is product-line expansion. After the Model Y crossover-size SUV comes Tesla’s light-duty pickup truck, dubbed Cybertruck. Next in the pipeline, investors expect a smaller $25,000 EV. “It would be reasonable to assume that we would make a compact vehicle of some kind and probably a higher capacity vehicle of some kind,” said Musk in July 2020.

New Street Research analyst Pierre Ferragu wrote recently that Tesla’s current product lineup overlaps with about 25% of the global auto market. “A [$25,000] EV will quadruple Tesla’s addressable market in volume,” Ferragu said. A lower- priced, compact vehicle would allow Tesla to sell to almost anyone looking for a new car.

The continuing expansion of Tesla’s total addressable market is a big reason why Ferragu rates shares Buy and has a target of $900 price for the stock price. Rosner also rates shares at Buy, with a $900 target.

That implies gains of about 25% from recent levels, but Tesla stock hasn’t done much recently. Shares are flat year to date, while the S&P 500 and Dow Jones Industrial Average are up 19% and 16%, respectively. Tesla stock did, however, rise 743% in 2020.

Write to Al Root at allen.root@dowjones.com

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