Bank of America analyst John Murphy recently highlighted that Tesla is poised for gains in the long term, but will have to endure some short-term challenges along the way. One of the major hurdles facing Tesla is the transition to producing its new Model Y vehicle. Tesla’s Chief Financial Officer Vaibhav Taneja announced during the last earnings call that the company will start producing the Model Y in all its factories simultaneously next month.
Taneja emphasized that this transition is unprecedented, as no other company has updated all of its factories at the same time while introducing a best-selling car to the market. This changeover is expected to result in several weeks of lost production in the quarter, impacting margins due to idle capacity and ramp-related costs. However, Taneja expressed confidence that these challenges will be overcome as production ramps up.
Murphy predicts that the shift to Model Y production in all of Tesla’s factories could lead to a production loss of 100,000 vehicles. He also noted that Tesla’s outlook for 2025 appears less defined, with the company seeming to step back from Elon Musk’s previous prediction of 20-30% volume growth by this year.
In addition to the Model Y production shift, Murphy anticipates that declining average selling prices, attractive leasing terms, and various incentives could continue to put pressure on Tesla’s gross margins. As a result of his forecast, Murphy has lowered his 2025 earnings per share prediction for Tesla from $3.15 to $3.05. He maintains a cautious stance on Tesla, with a Neutral rating and a $490 price target for Tesla shares.
Despite the short-term challenges, Tesla remains on track for long-term gains. The company’s ability to navigate these obstacles and continue its growth trajectory will be crucial in maintaining its position in the market. Investors will be closely watching how Tesla manages the production transition and overcomes the short-term pain to achieve its long-term goals.