Let's talk a Tesla First of all, I Hate to say it, but when Elon Musk starts complaining about the Federal Reserve on Twitter, let's just say it's always been followed by a poor stock performance. And what was Elon Musk doing yesterday? He was complaining about the Federal Reserve on Twitter and how they need to lower rates by 50 basis points. However, as a long-term holder of Tesla, my bias exposed. Perhaps that'll create some more buying opportunities, but that's also predicated on having more cash to buy with.

But anyway, let's talk about what Morgan Stanley in the Wall Street Journal just had to say about Tesla and how that could impact Tesla versus the competition. Here we go: the Wall Street Journal Elon Musk cost cutting targets at Tesla pressure EV Rivals Now I Love hearing that because everybody keeps talking about how fantastic of an idea it is that uh, basically, uh, EVS are going to have so much competition and Tesla's going to be screwed because there'll be so much competition. Part of that is predicated on this this concept that oh well, all the other competitors are going to come out with a cheaper car and then Tesla's going to be screwed. Okay, well, let's talk about that because what do we have over here? First of all, uh, the Wall Street Journal dives into this idea that Elon Musk's new efforts of trying to cut costs by potentially 50 percent for a future release of a Model 2 quote ratchets up the pressure on Traditional Automaker says here: a managering director of a consulting firm in the Auto industry interviewed by The Wall Street Journal and what's fascinating to me is how this article Dives right into Volkswagen and a UBS analyst where Patrick Huber referred to Tesla's cost cutting plans in asking Volkswagen officials about their EV ID3 and that's because Volkswagen just on Tuesday had uh today just had an event where they talked about uh, the the various different uh, future plans for Volkswagen and in questioning the individual asks hey, so y'all want to cut prices but the reality is right now your ID3 electric vehicle barely sells above its Breakeven level How do you actually expect to make money with an even really cheaper priced car? In fact, he says I really struggle to see how Volkswagen is going to have an affordable electric vehicle that's profitable to you in a couple years time.

The response that competition will become tougher so we will try to stay as fixed as possible on the overhead side of cost I could do that because I was born in Germany Okay, but anyway, uh uh, they even have significant scale by Zen referring to their 25 000 Euro vehicle concept car from 2025 or that should be out at 2025.. Now let me just say this: how do you expect to get to scale on a car you haven't actually manufactured yet? If there's one thing we've learned is you start manufacturing a car first and then you get to more scale. What Volkswagen is trying to say is hey, don't worry, we're go in two years the scale of our production will be so amazing for our break. even ID3 that we'll be able to produce a car that's about 40 percent less expensive because we'll finally have figured out how to not operate a money losing business I don't buy that at all I think that sounds like a horrible idea and I don't think they're going anywhere but okay, we'll keep going here.

So uh, you've got here Caresoft Global which tears apart vehicles to Compare costs between competitors and estimates that Tesla's model Y could have about a three thousand dollar cost advantage to a competitor's comparable offerings not even including batteries. And that's today. Even if Elon Musk is unsuccessful at reaching a 50 reduction in costs, industry observers say any significant effort towards the goal would be meaningful at basically cementing Tesla's lead above its competitors. Okay, fascinating.

the rest of the industry is going to stand up and notice now. the the Uh, Wall Street Journal then jumps on over from basically going from this idea of Volkswagen actually thinks they're going to go from near breakevens to profitable on a car that costs 40 percent less money. Good luck to them. In the meantime, Tesla's uh, already got cost advantages today and on top of that are trending towards even better cost advantages.

And so then what do they do They compare to Ford They compare to Ford and they say Mr Farley often cites Tesla at having a more than ten thousand dollar vehicle cost Advantage per car Greater than that three thousand dollars. It's getting even worse for the Legacy auto. Uh, and what I think is great about Mr Farley is I Think he really realizes where the money is to be made and where money is not to be made. And one of the things that I think is incredible is his blatant basically admission of how behind four is.

Now some of you might remember this from the Q4 earnings call. I Think it's worth bringing up again because we're about to go into a Morgan Stanley piece. and in the Morgan Stanley piece, we have some potential negative news that we need to cover. Of course, we could always balance out negative news by reminding you about the coupon that expires tomorrow.

Prices go up, You get the guaranteed best price, you get lifetime access to those course member live streams uh, and all the new content that gets added. So, but what do we have here? Uh, Jim Farley makes it very clear that they as well are not profitable on EVS They're not expecting to be profitable on EVS until 2026.. they also realize they have to go through many more Cycles to understand uh, how not to waste an extra mile of cabling on their products when they actually manufacture a car. and while they figure out how to actually get to profitability, they also realize the place to make money isn't actually on the car itself, but on software.

You might remember me playing this clip of Jim Farley going. but our new fully updated electric architecture is basically where we want to focus because we've learned on Pro. What we've learned on Pro is we can make real money on software. He says it kind of a little bit creepily, but the point is, they're dreaming to be Tesla.

That's the point is. the competitors are dreaming to be Tesla And basically the Wall Street Journal is making fun of them. here. they're making fun of Volkswagen and they're making fun of Ford by showing they're not even close.

Now look even GM suggests our aim is to have industry leading margins. They don't They don't break out what their margins are because they're probably so miserable. So for GM and Volkswagen they're not competitors to Tesla. Now there is a risk factor though, and Morgan Stanley believes the risk factor despite having a 220 price Target on Tesla and holding an over rate rating for the stock.

which means they lack it. Uh, they believe that EV price cuts are not a fad, but instead are a trend. Uh, and they think basically more price cuts are going to come and that investors should anticipate further price Cuts even. Uh, if basically Tesla isn't the one cutting see they say here one of the reasons analysts believe prices will continue to drop is competition.

If Tesla doesn't cut prices, someone else will, that's Morgan Stanley's take I Actually completely disagree I completely disagree with this. So why do I disagree? Well, I Believe that the entire industry doesn't have any room to cut prices anymore. Byd takes three percent to net Tesla takes 17 to net on electric. Well, that's actually the entire business for both of those companies.

Then when you look at four, GM and Volkswagen they're basically all losing money on their EVS How can the rest of the industry cut prices? They can't be a price leader because they have No. PP They have no pricing power. They don't control price. Who controls price? Tesla does as soon as Tesla cut what happened Neo Byd dealerships uh Volkswagen Ford GM All of them cut prices.

They didn't cut prices first because they don't they can't Tesla did so. I actually disagree that even if others, uh, even if Tesla doesn't drop prices, others will and then that'll somehow subsequently lead Tesla cut prices I Don't see that. but maybe now in response to commodity Steve My boy Steve over here. Uh, this is the only person that my son knows because he knows that Steve likes gold like Steve from Minecraft Steve says Volkswagen is spending 190 180 to 190 billion on battery plants and securing raw material supply over the next five years.

That's a huge amount of money. What will hurt Volkswagen is higher energy prices in Germany due to no more natural gas from Russia The raw material price of battery Metals is not going to drop between now and 2026. it will stay roughly flat or increase I think increase. Well, fairness Steve is all in on the comms.

all in on the commodities I'm not I don't think Commodities actually have pricing power but I got this for you Steve I did I I had to do it man I had to do it I had to do it Morgan Stanley and the Reuters piece here. falling lithium prices have also contributed to price Cuts Spot prices for China's lithium carbonate have fallen sharply to just below 40K a ton. As the latest status shows, China's battery production is still still significantly exceeds installations. In other words, a glut of battery supply uh is sort of building up.

and that is because to some degree EV demand is slowing. So we are actually seeing some of that slowing start affecting commodity prices. I Personally am of the mindset that Commodities while they might be necessary I think they have hit as sort of a speculative bubble where they have speculatively been ridden up because people believe they're going to be so necessary. and I think that is creating a little bit of a bubbling there Now, don't get me wrong, commodity prices are still substantially higher than where they have been in the past, but the point of this is not to discredit.

Steve Even though that would be fun and I'll still have a beer with Steve I Understand, commodity prices are still higher and I respect Steve What's worth first noting though, is that this is actually a very good thing. Who's it? Who whom is this good for whom is this good for? It's actually good for EVS that are still selling, which would be like Teslas right as it compared to like Fords where your production line is stuck uh or GM even shut down their production line for a period. So whom is this good for? Well, it's good for EVS that are still selling so that would be Tesla and Byd. but who else is it good for? Well, it's also good for battery sellers like Generac uh and and face when those battery costs come down right? So uh, that that is, that's you know it's actually a good thing.

Uh, so we are prepared for Price Cuts uh to be an established feature though, says Morgan Stanley. As Supply demand continues to change, we would prepare for potentially lower margins and that could potentially create more opportunistic entry points for the stock. Huh? Okay, that's where I have to actually somewhat agree with Morgan Stanley. While I do not believe that uh uh, you know other EVS are going to drive pricing cuts at Tesla I Do think Morgan Stanley is potentially correct in that.

Yeah, maybe maybe, uh, lower margins are going to be coming and I think Q1 is probably going to hurt for Tesla and maybe that's why Elon Musk to kind of Go Full circle is yapping about this idea of a 25 BP cut. The reason for that is I Really think that Elon uh Well I mean we know this. We know he has a an early look on this. We know in the last earnings call the expectation set was that margins could go down to 20.

but I don't think Wall Street is convinced that we're going to get 20 yet. So I'm a little nervous for that next earnings report combining Elon Morgan Stanley And what was said in the last earnings call: I I'm not short-term YOLO Tesla uh I Do not believe we're going to revisit the lows we've had on Tesla Could we trade sideways and maybe test out that you know around the ones? I Don't know that we're gonna even break 170 if we do, it wouldn't be that great. but 170 175 around those got some pretty good support I Just don't see us escaping from that until after we get past the the Q1 era unless of course we had an incredibly bullish fad tomorrow, which which is always a potential, but uh, but but I remain I remain unconvinced. Bottom line: out of all of this coupon code expires tomorrow.

Get life insurance in as little as five minutes. Get 12 free stocks with Weeble Tesla Bottom Line: Short Term Little Bearish Elon uh Margins Short-term bearish. Especially through this next uh uh, quarter report which comes out in April probably around 4 20 actually actually I wonder if it's scheduled? That would be funny? Let's see here: Tesla Earnings Report Date: Let's see if uh oh, missed opportunity 419 so that's less than a month away. We've already got Tesla earnings coming up.

So I think you're going to have a fear trade going into Tesla Earnings usually Tesla Stock trends down after earnings. uh and after events. Any kind of events tend to push Tesla down lower as well because well, the events are just not as juicy to to the broader. Wall Street Market they're due to see the long-term investors.

They're fantastic for long termers, but in the short term, events and reports seem to be more negative than positive. So anyway, uh, 419, mark your calendar for that. I do actually think that event actually these these falling commodity prices will help. but I don't think they're falling quickly enough to actually get Tesla back to higher margins soon.

Remember what they told us in the last earnings call and the last earnings call? they said yeah, probably trending closer to 20 and then it'll take us a few years to get back to 30 margins. So they did set the expectations. but I personally think nobody really paid attention to what they said in that earnings call. So I think there's uh, there's going to be a a little oopsie doopsy there.

um so we'll see. but yeah Elon asking for a 50 BP cut I think is a little bit of a red flag too. so again, short-term bearish, long-term bullish. I Really don't think the competition has pricing power uh or or holds a candle, but I'll I'll use it as a a bite of the dip off after I recorded this segment Kathy Wood actually gave her perspective.

So let's go ahead and play that for you now. But remember, coupon code expires tomorrow. it's gonna be a big price increase. so lock in that price and you get guaranteed lifetime access to all of the new content that's added the course member live streams you get guaranteed best pricing and any new lectures that are added.

you get totally for free to those courses so it's a great deal. Check it out, link down below. Uh, and the real beneficiaries are going to be companies who have Ai expertise, domain expertise, and critically, a large body of data. And we think Tesla the largest position in Uh, Rkk and Ark Q and we even own it in Arkw because it's an AI company, it is probably one of the most important AI beneficiaries in the form of autonomous taxi platforms ultimately which are powered by AI got to ask you about Tesla Kathy Um I Know it's you're one of your favorites and your top.

Holdings Still always a Battleground The latest concern from investors is about margins. So so they've been taking these price cuts which we debated last time and even if that's catalyzing demand at what costs, is that a reason for concern? Well, I think uh Tesla has an Elon Musk in particular has said that he will pass along any cost declines that uh, that uh Tesla is enjoying and I think that's what's going on right now. uh and uh I think he's in a position to drive prices down much more quickly than most other manufacturers save for some in China and I think there's deflation in Auto prices taking place in China I think Tesla LED That and Byd followed, and so there's a deflationary tug there which is actually going to accelerate this shift from gas powered vehicles to electric vehicles which is something that Tesla wants. So we think, uh, the the the mistaken assumption here is that Tesla has to cut prices because of competition.

uh Tesla we think can drive prices down because its costs are moving down a particularly battery and drivetrain costs faster than most other manufacturers. So I think the key out of what Kathy said. While a lot of it is similar to what I said, maybe she was watching me as I I'm just kidding. I'm not trying to actually think that I think many people can have a very similar opinion.

Uh, but um I think the key to what Kathy said here is that Tesla is the leader and they can drive those price reductions because they are the leader. Unfortunately though, I do think we're not a hundred percent at that level yet. that is, even though Tesla is the leader in pricing Cuts their margin will suffer short term first and then in the long run. I Think come back.

So I think um I think right now. Tesla If I were to, you know what? Maybe I can visually describe this a little bit better. I think Tesla right now is shooting ahead of the Running Deer Uh, and so that's a fancy way of saying. Look, if if this is a deer right here there we go.

Uh, there, it's got horns I Don't know. Do deers have horn? Whatever. So here's your deer. uh, and it's running that way really fast.

You want to point your gun depending on how far away you are. Kind of like here, right? Something like that. I don't know. Maybe that's not the best.

uh, kind of radical. whatever. Anyway, you kind of want to aim here. So so in my opinion, this is a little bit of what you're getting with Tesla So the way this would work is drop prices, cut prices to where margins drop to 25 or to 20 from 25.

Then once you hit your target, you get the loot and you end up going back to 25 to 30 percent as your cost declines actually catch up. But I Do think we still have this period of Time ahead of us. But yes, I I agree with Kathy Wood Otherwise I Hope you enjoyed my dear drawing. If you want more of those, well, you're gonna have to get life insurance in as little as five minutes.

Link down below by going to Metcaven.com Life and get yourself 12 free stocks at Weeble to basically pay for your free life insurance Yes, paid promotion, but pay for your life insurance by getting 12 free stocks at Weeble How cool was that that? Kevin.com Weeblem.com Life Link down below. Thanks Bye.