Tesla
bulls are quick to point out a slowdown in EV sales growth is nothing more than a soft patch driven by high interest rates and a slowing economy.
Bernstein analyst Toni Sacconaghi qualifies as a bear, rating
Tesla
(ticker: TSLA) shares Sell, with a $150 price target for the stock. He looked at the EV growth problem in a Monday report.
“Some investors have asked whether wealthy, tech-savvy early adopters have become increasingly saturated, with mass market consumers, average Americans, not yet ready to pick up the slack/ purchase an EV,” he wrote.
Sacconaghi dove into state-level data and found some interesting tidbits. States with the highest EV adoption rates, such as California, Hawaii, and Washington, have three defining characteristics, he says: They lean Democratic, have higher-than-average incomes, and higher rates of urbanization.
None of that is a surprise, but it is interesting to note that 85% of EVs are owned by Americans in the top third of income and almost 80% are owned by city dwellers.
It would be a problem for Tesla if the data mean all Democratic early adopters already drive EVs. Sacconaghi doesn’t believe that is the case, though.
He found EV growth in highly penetrated, relatively wealthier states came in above 40% in the first half of 2023. Growth in relatively poorer states came in above 50%.
“EV adoption is at an earlier stage in the adoption curve for more conservative, less affluent, and more rural states,” wrote the analyst. “Highest penetration EV states do not appear to be uniquely stalling out, i.e. do not appear saturated.”
The biggest issue he sees isn’t politics, but affordability. The U.S. needs cheaper EVs. The average price of an EV, before any federal tax credits, came in at about $52,000 in October, according to Kelly Blue Book. The average price for all vehicles was about $48,000. EVs are still more expensive than average with the hottest sellers qualifying as luxury cars.
What is more, the average price for a nonluxury vehicle, according to Kelly, was about $44,000. EVs are still about $8,000 more than nonluxury vehicles.
RBC analyst Tom Narayan is a Tesla bull. His rating is Buy and his price target is $301 a share, essentially double Sacconaghi’s. Narayan came to a similar conclusion as Sacconaghi—prices need to come down.
He also believes car buyers need newer models. Two of the bestsellers, the Chevy Bolt and Tesla Model 3, have been around since 2016 and 2017, respectively, he told Barron’s recently.
Both see more EV growth down the road. That doesn’t mean they agree on Tesla stock, though.
Total EV growth and penetration are a couple of issues that impact Tesla price targets on Wall Street. Valuation, profit margins, and overall EV competition matter, too.
Tesla stock closed up 0.6% at $235.60 on Monday, while the
S&P 500
and
Nasdaq Composite
added 0.7% and 1.1%, respectively.
Write to Al Root at allen.root@dowjones.com
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