Tesla: What are the issues for Elon Musk's electric car company in today's Q1 earnings?

Tesla Inc (NASDAQ:TSLA) will pop the trunk on quarterly earnings after markets close on Monday, pressing ignition on a week when it will be one of seven of Wall Street’s 10 largest companies coming to market, while 180 of the S&P 500 companies are scheduled to report results. The electric vehicle (EV) maker has a number of issues that investors want to hear about, not least the recent crash of one of its cars where the driver reportedly thought the wheel was being directed by the Autopilot system. As well as fielding questions about that, boss Elon Musk is also likely to be asked about the possible hit from Joe Biden’s proposed global tax of tech giants, the company’s big Bitcoin purchase, his thoughts on Dogecoin and maybe also the reported plans for a factory in the West Country. The company’s fundamental business and its potential to grab market share as the globe shifts from petrol power to electric batteries is what has driven its US$700bn market valuation. To that end, Musk is looking to scale up production while retaining the profitable record, with the fourth quarter of 2020 saw quarterly revenues rise 46% year-on-year to US$10.7bn and earnings per share (EPS) jump 60% to US$0.80. The Wall Street consensus points to EPS of US$0.79 on revenues of US$9.92bn for the first quarter of 2021, with the company having this month reported record vehicle sales for the quarter of 184,800, more than double the 88,400 reported last year and about 10k ahead of forecasts. Another big issue for Musk is that Tesla was forced to make a grovelling apology after a backlash from the state-run Chinese media following customer complaints. “This is important,” says analyst Neil Wilson at Markets.com, “China is a key market for Tesla and other automakers who are seeking to tap the growing EV market in the world’s second-largest economy. “Tesla has made a big investment in local production, which seems to be paying off.” Reported sales of US$6.7bn in China last year, made the country the second biggest market for the firm after the US, whilst the Model 3 sedan was China’s best-selling electric vehicle in 2020 and the Model Y crossover in March almost doubling the level from the month before. While this will not be met head-on in these results, competition is now the key for Tesla, as more of the ‘legacy’ car manufacturers putting the pedal to the metal as they play catch-up on their electrification strategy. “It remains the case that the chief bear thesis on the stock is that current valuations imply a massive market share gain from the traditional OEMs,” says Wilson. “Given the pace of progress they are making on the EV front, it seems hard to justify the Tesla multiple even allowing for ongoing sales growth and margin improvements.” As Wilson noted, this month’s Shanghai auto show displayed a range of competition from local Chinese rivals such as Nio, Geely and Xpeng, while VW has been showing its EV metal this year and others such as Mercedes, Jaguar Land Rover, Audi and Volvo are among the many have talked some big talk about their upcoming range battery-powered vehicles have also seen their electric vehicles met with approval, while as well as the Chinese EV hopefuls, investors will also soon be able to buy shares in lower-priced rival Lucid Motors.  "For Tesla, things are only going to get tougher," reckons Wilson.