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The State of Electric Vehicle Sales and Inventory

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The current state of electric-vehicle (EV) sales in the auto industry has sparked both concern and optimism among investors. On one hand, some analysts believe that slowing sales and rising inventory could lead to a necessary recalibration of legacy auto EV strategies. Morgan Stanley analyst Adam Jonas warns that Tesla (TSLA) may claim a larger share of the EV market. However, there are others who see strong potential for continued growth in EV sales. Mizuho analyst Vijay Rakesh believes that EV sales have been ramping up well and predicts momentum in the auto industry, despite challenges such as a stretched consumer market and high interest rates.

So, who is right? Both sides have valid arguments, and in order to gain a comprehensive understanding of the situation, investors must dive deeper into industry inventory practices.

Currently, U.S. dealer inventories stand at approximately two million units, which equates to about 53 days of supply based on the data from Cox Automotive. This figure suggests an annualized selling rate of around 14 million units per year. Historically, about 60 days of inventory was considered normal.

In 2022, Americans purchased roughly 14 million cars, a lower figure compared to the pre-pandemic average of 16 to 17 million units per year. Factors contributing to this decline include low inventories, higher prices, and increased interest rates.

Considering these statistics, two million units of inventory may seem low if selling rates return to pre-pandemic levels.

Now let’s shift our focus specifically to EVs. At the end of the first half of this year, there were approximately 91,000 EVs on dealer lots. In the second quarter of 2023 alone, Americans bought a record-breaking 295,000 EVs, marking a 48% increase year over year. Based on these second-quarter selling rates, the current EV inventory equates to about 28 days.

In conclusion, the state of EV sales and inventory in the auto industry is complex. While there are concerns about slowing sales and rising inventory, there is still immense potential for growth in the EV market. To make informed investment decisions, it is imperative for investors to closely monitor industry inventory practices and keep a pulse on evolving consumer trends.

The State of EV Inventories in the US Auto Industry

The US auto industry is currently facing a unique situation when it comes to electric vehicle (EV) inventories. While Tesla, the leader in the EV market, typically builds vehicles on demand and therefore doesn’t have a significant inventory, other traditional auto makers have around 70 days’ worth of EV sales sitting on their lots. This is higher than usual and has led to some interesting dynamics in the market.

Having excess supply can put pressure on prices, which is why Ford Motor (F) has decided to lower prices for its all-electric pickup truck, the F-150 Lightning. By doing so, they hope to stimulate demand and move more units off their dealer lots. This move by Ford highlights the importance for traditional auto makers to have a breakout hit that captures the attention of consumers.

In the second quarter of this year, only seven out of the 42 non-Tesla EV models sold in the US surpassed the 5,000 unit mark. One standout model was the R1T truck by Rivian Automotive (RIVN), an EV start-up. Among the traditional auto makers, only six of their EV models managed to achieve the same level of sales success.

Tesla’s Model Y, on the other hand, sold over 105,000 units in the second quarter, showcasing the impact of having a highly popular model in the market. It is clear that traditional auto makers need a similar hit to compete effectively. General Motors (GM) has plans to release their Chevy Blazer and Chevy Silverado EVs later this year, with the more affordable Chevy Equinox slated for a 2024 launch. These upcoming releases are definitely worth keeping an eye on. Additionally, the second half of 2023 will reveal how well Ford’s F-150 Lightning sales bounce back after facing production disruptions and lower sales in the first half of the year due to battery issues.

Stock analysts have varying opinions on Tesla’s future. Jonas rates Tesla stock as Hold with a $250 price target, while Rakesh rates it as a Buy with a $300 price target. These differences in ratings may ultimately come down to the inventory levels and the company’s ability to meet demand.

Looking at the overall analyst coverage, approximately 43% of analysts currently have Buy ratings on Tesla stock. This is slightly lower than the average Buy-rating ratio for stocks in the S&P 500, which sits at around 55%. The average analyst price target for Tesla stock is about $230.

In conclusion, the EV inventory situation in the US auto industry is worth monitoring. Traditional auto makers need to step up their game and deliver hit vehicles that resonate with consumers to compete with Tesla’s dominance. With upcoming releases from General Motors and the recovery of Ford’s F-150 Lightning sales, the EV landscape is poised for further excitement and growth.

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