Analytikern om 2024: Kommer en mindre, billigare Tesla

It’s the time of year for reflection and predictions.

CFRA automotive analyst Garrett Nelson published his list of predictions for 2024 on Tuesday evening. Some are provocative while others align with the current Wall Street consensus. All are worth examining to help set investor expectations heading into the new year.

Here is the list along with some context (and how he did last year).

Nelson expects a smaller, lower-priced Tesla to be unveiled at some point in 2024. That isn’t a bold prediction, but it’s an important one for Tesla and the auto industry.

For Tesla, a new model can reinvigorate growth. Tesla is expected to ship about 1.8 million units in 2023, and 2.1 million units in 2024. That’s less than 20% growth and far from the 50% average annual growth the company targets.

For the industry, affordability is key. Sales growth of battery-electric vehicles, or BEVs, is slowing down partly due to a lack of products.

Most EVs are priced like luxury cars and BEVs now account for about one-quarter of total U.S. luxury car sales. BEVs account for about 3% of nonluxury sales. There are reasons nonluxury car buyers haven’t adopted BEVs yet such as range anxiety. Another big one is a lack of choice.

“Hybrid vehicles will surge in popularity in the U.S. in 2024,” Nelson writes. “Recent trends suggest that U.S. consumers are really starting to see the value of hybrid vehicles.”

Hybrids are having a strong 2023, accounting for about 8% of U.S. car sales, up from roughly 5% in 2022.

Price is part of the reason, writes Nelson. “The average hybrid transaction price of $42,400 so far in 2023 has been lower than the $44,800 average for internal-combustion engine vehicles.”

That’s an average price. There are cheaper options. The 2024 Prius starts at about $28,000. Cheaper, efficient options should keep hybrids selling well in 2024.

The traditional internal combustion engine and transmission still cost less than an electric motor and batteries. That is changing as battery costs fall.

Today, the average EV is about 10% more expensive than the average ICE vehicle. In 2022 that number was about 30%. Nelson sees a smaller gap ahead.

“EVs will nearly reach price parity with internal combustion engine vehicles in the U.S. in 2024,” he writes. “Following the aggressive EV price cuts of various auto makers, combined with increased incentives, EVs moved much closer to achieving price parity with the average price for all vehicles in 2023.”

Lordstown Motors filed for bankruptcy protection in June. Nelson sees more in the sector, but doesn’t name which companies he thinks will fall next. The analyst does note, however, that Rivian Automotive, Polestar Automotive, Lucid Group, and Fisker are nowhere “near profitability and are burning through cash at a rate that could threaten their viability.”

Car prices skyrocketed amid Covid-19-induced supply-chain shortages that left little inventory on dealer lots. Things are normalizing, although slowly. New cars are a few hundred dollars cheaper in 2023 than they were in 2022. They will be a little cheaper again in 2024.

Lower prices typically mean more demand. Nelson sees industry sales growing. That also means Nelson doesn’t see a hard landing for the economy.

While things are generally improving, Europe will see the least of it. European sales have rebounded nicely in 2023, up about 20% year over year. Nelson doesn’t see that repeating in 2024, and he doesn’t like shares of auto makers with big European businesses.

The average car in the U.S. is almost 14 years old, while the average truck is about 12 years old. The average car age has gained about five years over the past three decades. Some of that is improving quality, but high prices and lower dealer inventory mean people prefer to fix versus buy.

Nelson points out there is a way to play that trend in the stock market. It’s good for shares of aftermarket-parts suppliers such as O’Reilly Automotive and AutoZone.

He likes parts suppliers, and adds that AutoNation “will be the best-performing U.S. auto retail stock in 2024.” His price target is $180 a share, up about 20% from recent levels. AutoNation stock is up about 45% over the past 12 months, beating the S&P 500 by about 20 percentage points.

Nelson predicted that Tesla would be the top-performing auto stock in 2023. Coming into Wednesday trading, Tesla stock was up almost 110% year to date, compared with shares of General Motors and Ford Motor eking out gains of 7% and 3%, respectively.

Nelson also correctly saw lower car prices, higher average car ages, and that Tesla Model Y and 3 vehicles would lead the EV sales race.

One prediction that didn’t go his way was Aptiv. He predicted that would be the best-performing auto-supplier stock. Entering Wednesday, shares are down about 5% year to date. Others have done better, including AutoNation shares, which are up more than 40%.

He also didn’t predict a UAW strike. It’s tough to get them all right.