What You Missed This Week in EVs and Clean Energy

Tesla’s deliveries disappoint Street amid reports of low-cost car plans cancellation

Institutional investors and professional traders rely on The Fly to keep up-to-the-second on breaking news in the electric vehicle and clean energy space, as well as which stocks in these sectors that the best analysts on Wall Street are saying to buy and sell.

From the hotly-debated high-flier Tesla (TSLA), Wall Street’s newest darling Rivian (RIVN), traditional-stalwarts turned EV-upstarts GM (GM) and Ford (F) to the numerous SPAC-deal makers that have come public in this red-hot space, The Fly has you covered with “Charged,” a weekly recap of the top stories and expert calls in the sector.

Q1 DELIVERIES: 

In the first quarter, Tesla produced over 433,000 vehicles and delivered approximately 387,000 vehicles. We deployed 4,053 MWh of energy storage products in Q1, the highest quarterly deployment yet. Decline in volumes was partially due to the early phase of the production ramp of the updated Model 3 at our Fremont factory and factory shutdowns resulting from shipping diversions caused by the Red Sea conflict and an arson attack at Gigafactory Berlin.

Commenting on the news, RBC Capital said Tesla’s Q1 deliveries of 387,000 were “much softer than expected.” The firm believes the electric vehicle slowdown underway in the U.S. is likely a factor. RBC continues to value Tesla’s energy business above the car business given its higher profitability levels and growth profile. It also values autonomy above the car business and thinks the full self-driving free trial could potentially be more important for the Tesla investment thesis longer term than Q1’s delivery miss.

Tesla’s Q1 deliveries negatively shocked the Street with 386.8K vehicles vs. expectations of 443K, while Model 3/Y deliveries were 369.7K in Q1, with volume declines partially due to early phases of the production ramp of the updated Model 3 and factory shutdowns from the Red Sea conflict and the Berlin shutdown, Wedbush tells investors in a research note. While the firm expected a bad quarter, Wedbush calls Tesla’s Q1 an “unmitigated disaster that is hard to explain away,” and views this as a “seminal moment” in the story for CEO Elon Musk to turn the story around or face darker days that could disrupt the long-term narrative. The firm, which made no change to its rating or price target, says Street criticism is warranted as growth has been sluggish and margins showing compression.

LOW-COST CAR PLANS:

Tesla has scrapped plans for a low-cost car to drive its growth into a mass-market automaker and plans to instead focus on self-driving taxis instead, Reuters‘ Hyunjoo Jin, Norihiko Shirouzu, and Ben Klayman reported on Friday. According to three sources familiar with the matter and company messages seen by Reuters, the strategy shift comes as Tesla faces competition from China EV makers including BYD.

Reacting to the news, Tesla CEO Elon Musk said via X that ,”Reuters is lying (again)” after the news agency reported that Tesla canceled plans to build its most inexpensive car, the Model 2. Sources told Reuters that Tesla will continue developing self-driving robotaxis on the same small-vehicle platform. Shares of Tesla are down 3% to $166.45 in late morning trading. The stock is off the day’s lows following Musk’s tweet.

Click here to check out Tesla’s recent Media Buzz Sentiment as measured by TipRanks.

RIVIAN DELIVERIES: 

Rivian Automotive announced production and delivery totals for the quarter ending March 31. The company produced 13,980 vehicles at its manufacturing facility in Normal, Illinois and delivered 13,588 vehicles during the same period. Production and delivery results during the first quarter of 2024 were in line with Rivian’s expectations. For the full year 2024, management is reaffirming guidance for annual production of 57,000 total vehicles.

Deutsche Bank says Rivian Automotive’s 13,588 deliveries in Q1 was better than management’s initial commentary calling for a 10%-15% decline in volume quarter-over-quarter as well as the firm’s estimate of 12,200 units. While the volume performance was ahead of expectations, this shouldn’t come as a significant surprise, given the R1 re-rate shutdown will not start until Q2, Deutsche tells investors in a research note. The firm continues to see downside risk to Rivian’s outlook for positive gross margin exiting 2024 and expects deeper E+BITDA losses.

SLOW INVENTORY REDUCTION: 

Citi downgraded Enphase Energy (ENPH). The firm says the pace of the company’s inventory reduction is slower than expected in the U.S. A slower recovery domestically combined with threat of competition from Tesla and need for further inventory reductions puts both Enphase’s near- and long-term outlook in question, Citi tells investors in a research note. The firm’s revenue estimate is now 5% and 8% below street estimates for 2024 and 2025, respectively. It will remain on the sidelines pending a better entry point, adjustment in Street estimates and/or clarity on the company’s long-term earnings power.

NEW MODEL WEAKNESS: 

Barclays downgraded Nio (NIO). The firm says weaker March sales suggest Nio’s troubles in selling its 2024 models, which launched in March, are putting its 2024 consensus estimates at “significant risk.” With weaker than expected deliveries in March, Nio’s Q1 deliveries came in in line with the revised guidance of 30,000 provided on March 27 but below its original guidance provided on March 5, Barclays tells investors in a research note. The firm believes the miss reflects weaker sales momentum of the new 2024 models which were just launched in early March. With limited new product launches in the pipeline planned for the rest of 2024, Barclays sees significant risks for Nio’s ability to meet consensus estimates for the remainder of the year.

LIMITED LIQUIDITY: 

Citi downgraded Plug Power (PLUG). The firm believes the company’s “limited” liquidity, relatively high-cost structure, dilution from capital raises and “tough” competition should continue to weigh on the stock. Plug Power reported the issuance of 77M shares at a $3.90 price in February, which represents 13% of the total shares, Citi tells investors in a research note. The firm believes this dilution will continue as the company needs more cash and as profitability remains elusive. Raising prices in an oversupplied electrolyzer market may either negatively impact sales more than anticipated or not materialize in the face of competition, contends Citi.

“GREEN SHOOTS” EMERGING: 

Barclays upgraded Array Technologies (ARRY). The firm says Array should outperform Nextracker (NXT) in the coming months given its “de-risked” 2024 revenue guidance, early signs that the company could be taking back share, and relative valuation versus peers. While Array encountered some execution mishaps last year which resulted in market share losses, “some green shoots” indicate that it will be much more competitive on a go-forward basis, which could materialize in it taking back some share, Barclays tells investors in a research note.

Meanwhile, Barclays downgraded Nextracker. The company may provide an initial fiscal 2025 outlook below consensus estimates, the firm tells investors in a research note. Barclays notes Nextracker likes to beat and raise and given the industry-wide constraints around transformers and interconnection queues, the company “may want to factor in some cushion for those things.” Despite the downgrade, it believes Nextracker should be a core holding. The downgrade is more a relative valuation call, the firm notes.

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Originally Posted April 8, 2024 – What You Missed This Week in EVs and Clean Energy