EV slowdown is not showing any evidence of an inflection

Analysts at RBC Capital Markets said one of the key takeaways from the current earnings season is that the electric vehicle (EV) market “is not showing any evidence any evidence of an inflection.”

Tesla (NASDAQ:)’s 2024 delivery outlook suggests significantly lower growth compared to 2023, attributing the cautious forecast to uncertain economic conditions such as affordability and interest rates.

This has led to a consensus expectation of a 14% increase in deliveries for 2024, a sharp decline from the 40% growth seen in 2023, amid concerns that price reductions may be necessary to meet these projected volumes.

Meanwhile, Ford (NYSE:) reported a worsening in its EV losses for the fourth quarter of 2023, with the loss deepening to $1.57 billion from $1.329 billion in the previous quarter, and anticipates even higher losses for 2024, surpassing consensus estimates.

In summary, legacy OEMs “could be better positioned versus Pure Play EV names,” analysts write.

“In particular, names less exposed to EV fixed cost base (Stellantis (NYSE:)) or demand issues (Ferrari (NYSE:)),” they added.

In the meantime, the pursuit of Level 4 autonomous driving continues to face obstacles, indicating that significant barriers to full automation remain.

“Focus will likely be on Level 2+ efforts for the time being. OEMs might shift to outsourcing to suppliers more than pursuing autonomy inhouse. Mobileye SuperVision and Tesla FSD are consistent with this narrative,” analysts said.

“We are not expecting a major Tesla FSD licensing announcement anytime soon, but should attach rates increase on existing Teslas, it could be an important catalyst for shares. This could come from price cuts to FSD,” they added.

Lastly, concerns regarding excessive inventory buildup among suppliers appear to be largely unfounded, suggesting that the fears of an inventory glut may be exaggerated and are rather specific to Mobileye.