Tesla: Margin Pressure Could Lead To Lower Valuation


  • Tesla has cut prices of the Model 3 and Model Y in China, due to demand issues, which is negative for its gross margin.
  • Pressure on gross margins is more structural than cyclical, impacting negatively its valuation.
  • While its shares are no longer overvalued, there isn’t no margin of safety at current levels.

Tesla Shanghai Gigafactory

Xiaolu Chu

Tesla (NASDAQ:TSLA) is currently fairly valued after its share price correction suffered in recent months, but to become a buyer, a margin of safety is required and further downside may exist if gross margin continues to decrease


Production capacity (Tesla)


Model Y – Portuguese website (Tesla)


Gross margin (Tesla)


Capex (Author calculations)

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

If you are a long-term investor and want to be exposed to several secular growth trends, check out my marketplace service focused on different secular growth themes, namely: Digital Payments / FinTech, Semiconductors, 5G / IoT / Big Data, Electric Vehicles, and the Metaverse. If this is something that you may be interested in sign up today.

Leave a Reply

Your email address will not be published. Required fields are marked *