Does Tesla Motors Inc (TSLA) Really Have A Demand Problem?


It was quite natural that the stock market reacted to the reports of Tesla Motors Inc (NASDAQ:TSLA) laying off its staff in China, since the company witnessed a weaker than predicted demand for its cars. Though the company has confirmed that it is reducing the work force, it did not disclose the number of jobs that it planned to cut.

Challenge For Demand

Credit Suisse Analyst, Dan Galves, looked into the aspect of demand, which would be the key point in 2015 for Tesla Motors Inc (NASDAQ:TSLA). He said that the year 2015 would undoubtedly be a challenging year as far as demand is concerned with Model S’s third year of sales in the United States. Analysts believe that Model X will not be available meaningfully till late 2015 and that Tesla is not treating China as a big market.

Galves said that, with the demand risks fueling poor performance of the stock in the bourse, the reward could be very high if the company is able to deliver 45,000-50,000 Model S’ under the conditions. He said that this would make 100,000 Plus Model S / Model X units a possibility in the 2016 – 17 time-frame. This would lead the stock to witness a substantial rise in price in the near-term.

Demand Looks Strong

As far as Tesla Motors Inc (NASDAQ:TSLA) is concerned, the analyst believes that demand seems to be strong. The company closed the quarter with 10,000 unfulfilled orders in addition to the 1,400 vehicles that were planned for delivery in the fourth quarter and slipped into the first quarter of the year 2015.

Tesla Motors Inc (NASDAQ:TSLA)’s backlog grew significantly during the fourth quarter and was over double the estimated backlog in 2013. The company produced and delivered more cars in the fourth quarter. Credit Suisse was not worried about the inventory levels. The brokerage estimated approximately 1,000 units of unsold inventory at the end of 2014 year. Analyst said that having a minimum quantity of unsold inventory was necessary and that it does not view it as unfavorable.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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