Tesla Treads Carefully: Tesla (TSLA.O) has recently taken a cautious stance, aligning itself with General Motors (GM.N) and Ford (F.N) in the context of expanding electric vehicle production capacity. The primary drivers behind this caution are economic uncertainties and the looming concerns of a potential slowdown in demand.
Elon Musk, the CEO of Tesla, has expressed his apprehension regarding the impact of increased borrowing costs on the affordability of the company’s electric vehicles, despite notable price reductions. Musk has indicated that Tesla will exercise prudence and await further economic clarity before moving forward with its plans to expand a factory in Mexico.
In Musk’s words, “People hesitate to buy a new car if there’s uncertainty in the economy.” These remarks came during a post-earnings call where Musk also highlighted the financial challenges faced by American workers, describing a “paycheck-to-paycheck” reality. He emphasized the need for a measured approach, stating, “I don’t want to be going into top speed into uncertainty.”
It’s worth noting that Musk’s comments had a substantial impact, resulting in Tesla shares declining by more than 4% in after-market trading. These sentiments echo concerns expressed by other automakers and electric vehicle startups.
General Motors (GM) announced a one-year delay in the production of Chevrolet Silverado and GMC Sierra electric pickup trucks at a Michigan-based plant, attributing this decision to a flattening demand for electric vehicles. Similarly, Ford temporarily reduced one of the three shifts at a plant responsible for producing its electric F-150 Lightning pickup truck, with the automaker having previously slowed its electric vehicle expansion plans in July, diverting investments toward commercial vehicles and hybrids.
Notable electric vehicle startup Lucid (LCID.O) reported a nearly 30% decline in third-quarter production and only marginal growth in deliveries, despite offering substantial discounts. These developments raised concerns about the demand for its luxury sedan, the Air. Meanwhile, Amazon-backed Rivian (RIVN.O), known for manufacturing electric pickup trucks and sport utility vehicles, disappointed investors as it refrained from increasing its full-year production forecast, despite posting stronger-than-expected third-quarter results.
Tom Narayan, a global autos analyst at RBC Capital Markets, commented on these developments, saying, “It does highlight that there could be a slowdown in electric vehicle (EV) demand in the near term.” However, he emphasized that this slowdown primarily relates to pricing and affordability issues rather than a rejection of electric vehicles. Narayan expressed optimism that this could be a temporary dip, anticipating improvement as electric vehicle prices decrease and more affordable variants become available.
Automakers have substantial investments in electric vehicles, with their fortunes closely tied to the trajectory of electric vehicle demand over the next few quarters. These concerns have arisen at a time when supply chain constraints have disrupted production plans.
Notably, reports from July indicated that the U.S. market was not expanding rapidly enough to prevent unsold electric vehicles from accumulating at certain auto dealerships.
To prevent a decline in demand, Tesla, a market leader with industry-leading profit margins, has been at the forefront of price reductions, compelling others to follow suit. However, Musk pointed out that higher financing costs, driven by rising interest rates aimed at combating persistent inflation, have, in some cases, nearly negated the price reductions. This has made consumers looking to transition from gas-guzzling vehicles more cautious.
Musk highlighted this concern, stating, “If interest rates remain high … it’s that much harder for people to buy the car. They simply can’t afford it.” He added that a reduction in interest rates would prompt an acceleration of the expansion of the Mexico factory.
Nonetheless, based on current market estimates, a reduction in interest rates in the United States is not anticipated until June 2024, with recent robust economic data suggesting that the central bank might maintain higher interest rates for an extended period.
Also read: Tesla Autopilot Trial: Landmark Verdict Reshapes Self-Driving Reality
Our Reader’s Queries
Why do tires wear out so fast on Tesla?
When there’s added pressure on the tires, it can cause more friction between them and the road. Unfortunately, this can lead to the tires wearing out faster than usual. To prevent this from happening, Tesla suggests that you have your tires rotated and balanced every 6,250 miles. This will help to distribute the wear and tear more evenly, so your tires last longer and you can enjoy a smoother ride.
What is the minimum tread on a Tesla tire?
To ensure your tires meet our standards, the tread depth must be at least 4/32. You can easily check this by using a penny. Simply place the coin upside-down in the lowest tread of the tire. If Lincoln’s face is covered by the tread, then it meets our requirements.
Why do Tesla tires get flat so often?
Tesla vehicles are known to be heavier than most other models, which puts extra pressure on their tires. This can lead to flat tires, especially if the rear tires are not properly inflated or if the car hits a pothole. It’s important to keep an eye on tire pressure and avoid rough road conditions to prevent this issue.
Do Teslas need special tires?
To support the added weight of battery packs in electric vehicles like Teslas, the tires must be able to handle the extra heft. This is why Tesla mandates XL load rating tires for their Model S, X, Y, and most Model 3 versions. These tires are designed to accommodate the substantial weight of the battery packs, which can add hundreds of pounds more than similar-sized internal-combustion engine vehicles.