Gary Black, Managing Partner at The Future Fund LLC, believes that Tesla Inc. needs to introduce new vehicle form factors to achieve its targeted 20-30% volume growth in fiscal year 2025. According to Black, simply offering cheaper versions of existing models, such as the Model 3 and Model Y, will not generate sufficient growth.
The Challenge
Tesla’s recent third-quarter earnings report posted revenue of $25.18 billion, up 8% year-over-year, but missing analyst expectations. The company maintains its commitment to launching more affordable vehicles in the first half of 2025, with CEO Elon Musk linking this initiative to the company’s projected 20-30% annual volume growth.
Black’s Analysis
Black suggests that Tesla needs to expand into new market segments, such as:
- A four-seat Cybercab
- A Model 3 hatchback that could tap into the compact segment, which represents 12-15% of global market share
He emphasizes that these new models are necessary to capture additional market segments and drive growth. Black challenges the notion that these goals can be met through stripped-down versions of existing models, noting that Tesla needs an interim solution before the full deployment of autonomous Cybercab technology, expected in 2026.
Market Competition
The electric vehicle market is increasingly competitive, with Tesla facing pressure from both U.S. automakers and Chinese manufacturers. The company’s third-quarter operating margin of 10.8% and record-low cost of goods sold per vehicle at $35,100 demonstrate its ongoing efforts to balance profitability with market expansion.
Price Action
Tesla stock closed at $345.16 on Friday, up 3.69% for the day. Year to date, Tesla shares have surged 38.94%. According to Benzinga Pro data, Tesla has a consensus price target of $232.20, with a high of $400 and a low of $24.86.
Conclusion
Gary Black’s analysis suggests that Tesla needs to go beyond price adjustments and introduce new vehicle categories to capture additional market segments. With increasing competition in the electric vehicle market, Tesla’s strategy must extend to include new models and technology to drive growth and maintain its market share.