Tesla price cuts and EV adoption Tesla price cuts and EV adoption Tesla price cuts and EV adoption

Tesla price cuts and EV adoption

Equities 4 minutes to read
Peter Garnry

Head of Equity Strategy

Summary:  Tesla shares have had a great year relative to expectations in the beginning of the year when recession alarms were going off and technology stocks were under pressure from higher interest rates. But recently Tesla has experienced some headwinds taking down its shares by more than 20% since the peak in July as higher interest rates are bad for demand, more price cuts in China impacting margins, and worries over the trajectory of the Chinese economy. We also take a look at battery electric vehicle deliveries in Q2 2023 which have crossed the 1.5mn across the 15 carmakers we track.

Key points in this equity note:

  • Tesla’s share price is down more than 20% from the peak in July on higher interest rates, a weakening Chinese economy, increased competition, and new price cuts in its Chinese market.

  • Battery electric vehicles (BEV) deliveries crossed 1.5mn in Q2 2023 across 15 carmakers with the cumulative BEV deliveries since Q1 2020 crossing 10mn. Tesla’s market share is roughly 30%, unchanged from a year ago.

  • The cumulative 10mn BEVs delivered since Q1 2020 have reduced global oil demand by 300,000 barrels per day. With current adoption curve peak oil could be within 3-4 years.

Tesla price cuts, competition, and higher interest rates

After almost touching 300 per share in July, Tesla shares have declined 22% as of yesterday’s close but are still up a whopping 89% this year as cyclical stocks have outperformed the market with especially technology stocks rallying with extra help from the AI hype. As Tesla is still valued more like a technology company than a carmaker Tesla shares have been riding this year’s technology and AI rally. Continued high growth rate in electric vehicles has also helped.

Tesla share price | Source: Saxo

In the beginning of the year aggressive price cuts were driving Tesla shares higher as it was seen coming from a position of strength. There were likely two main drivers behind the price cuts, 1) lithium carbonate prices in China were falling rapidly reducing the cost of lithium-ion batteries, and 2) higher interest rates on new car loans (around 7.5%-8% compared to long-term average of 5%) were reducing demand causing inventory to rise at Tesla. As the AI hype took hold, earnings results were good against estimates, and deals with other carmakers to adopt its charging technology as the industry standard the stock price continue.

The recent weakness in Tesla is due to the outlook that interest rates will stay higher for longer reducing demand for cars and potentially the global economy is entering a stagflation environment which will be bad for cyclical sectors such as the car industry. Finally, the troubles in the Chinese economy is bad news for Tesla as the Chinese market is an important EV market. Today Tesla has announced its second price cut in China in just three days. While it can signal confidence that lithium carbonate prices are to fall again it can also be a sign that the Chinese market is weaker than estimated or competition has simply increased. In any case, it points to lower margins which has already been the case since Q1 2022 when the gross margin and EBITDA margin were 29.1% and 23.9% respectively compared to 18.2% and 14.3% in Q2 2023.

EV adoption is getting closer to an inflection point for crude oil

We have updated the figures for EV deliveries in Q2 2023 and expanded our tracking to 15 car companies. Last quarter saw 1.54mn deliveries a new record for battery electric vehicles (BEV) crossing the cumulative 10mn mark since Q1 2020. Tesla’s market share has fallen from estimated 67% in Q1 2020 to around 30% in Q2 2023 which is more or less unchanged from a year ago. The 30% stable market share is an interesting figure as it is roughly three times Toyota’s current global market share. If Tesla is able to keep its market share as the global car converts to selling only BEVs then one could make the argument that Tesla should be valued at three times the value of Toyota. Interestingly enough, this is also the current yardstick applied by the market. Toyota’s market value is currently $265bn compared to Tesla’s market value of $739bn. This is of course a simplistic and not realistic approach.

What is still striking about the global car industry is that the combined value of the 22 largest carmakers (pure EV makers and the ICE makers) has risen to $1.9trn from $0.7trn in December 2015 outpacing growth in global car production over the same period suggesting that investors are still discounting that the value of BEVs in the future are higher per car than the current ICEs. This assumption is still one of the biggest key risks to investors in Tesla and other EV makers. Will BEVs really have higher operating margins in the future than ICEs?

Nvidia share price | Source: Saxo

These 10.3mn BEVs have reduced oil demand by 0.28 Mb/d (million barrels per day) compared to what it would have been if these 10.3mn BEVs were not on the roads. The key inflection point for the crude oil market is when the annual reduction in oil demand from new additional BEVs equal 1 Mb/d which is roughly the estimate demand increase in oil per year. The current 12-month rolling oil demand reduction from BEVs is around -0.14 Mb/d, so peak oil demand, at the current BEV adoption, lies roughly 3-4 years into the future. For each quarter that passes the oil price dynamic will increasingly discount the BEV adoption rate.


Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.