EV (Electric Vehicle) giant Tesla (NASDAQ:TSLA) boasts of industry-leading margins, allowing it to aggressively cut the average selling price to sell more vehicles and maintain its leadership in the EV space. Now, with the UAW (United Auto Workers) strike likely to drive up labor costs for its ICE (Internal Combustion Engine) peers, including General Motors (NYSE:GM), Ford (NYSE:F), and Stellantis (NYSE:STLA), Tesla will have more room to lower its prices and push volumes.
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Last week, Ford Motor Company said the UAW’s proposals, if implemented, would more than double the company’s current UAW-related labor costs. Ford highlighted that its labor costs are already much higher than those of Tesla and other automakers who utilize non-union-represented labor. This will make it an uphill task for Ford, GM, and Stellantis to put up a fight against Tesla, as they are still in the early stages of the ICE to EV transition.
Echoing similar sentiments, Wedbush analyst Daniel Ives, on September 15, said that he sees Tesla as one of the top beneficiaries of the strike. The production disruption and higher labor costs will make it tough for GM, Ford, and Stellantis to challenge Tesla’s leadership in the EV space. Ives is bullish about TSLA and has a price target of $350.
Investors should note that Ives is the most accurate analyst for TSLA stock, according to TipRanks. Copying his trades on TSLA stock and holding each position for one year could result in 70% of your transactions generating a profit, with an average return of 14.76% per trade.
As Tesla maintains its EV leadership, let’s look at what the Street recommends for its stock.
Is Tesla Share a Buy or Hold?
Per analysts’ consensus estimate, Tesla stock is a Hold. Even though Tesla is in an advantageous position compared to its peers, there’s too much uncertainty regarding TSLA’s margins, noted Needham analyst Chris Pierce.
In a note to investors dated September 12, Pierce wrote, “TSLA’s strategic differentiation vs mass-market OEMs has compressed, with TSLA embracing discounting as a lever.” The analyst has a Hold recommendation on Tesla stock.
Including Pierce, TSLA stock has received 12 Hold ratings. Further, it has 11 Buy recommendations, while five analysts recommend a Sell. Analysts’ average price target of $270.80 is about 1.3% lower than current levels.
Bottom Line
Tesla’s focus on driving volumes through price cuts could pressure its peers to follow suit, thus affecting their profitability. Moreover, its ICE peers are already grappling with higher costs, making it challenging for them to chip away at Tesla’s market share. Further, Tesla is focusing on reducing the cost of manufacturing and, over time, expects its hardware-related profits to be supported by the acceleration of software-related gains, thus enabling the company to maintain its leadership in the EV space.
However, investors should be cautious as near-term pressure on margins and the year-to-date price gains could keep Tesla stock volatile.
