Many of the best growth companies pay a very small dividend or no dividend at all. They are using free cash flow to reinvest in and grow the business.
I would place “investing solely for the dividends” as the most common and costliest mistake for American and Canadian self-directed investors.
Tesla deliveries beat expectations
Tesla delivered a record 466,140 cars worldwide in the second quarter, outpacing Wall Street estimates of 445,000. The world’s leading electric car company had to chase volume by cutting prices. The deliveries are the most ever for Tesla, and are an 83% increase from a year ago. The company also managed to close the gap between production and deliveries. It produced nearly 18,000 more cars than it delivered to customers.
The electric vehicle (EV) maker delivered 19,225 Model Ss and Xs during the same quarter versus 16,000 consensus and 446,915 of the lower-priced Model 3 sedan and Model Y crossovers during the quarter versus 430,000 consensus.
Wedbush Securities analyst Dan Ives said price cuts have paid major dividends for Tesla, as demand appears to remain very strong and production efficiencies have allowed for the massive quarterly deliveries beat, according to this Seeking Alpha article. The firm thinks Tesla is still on track to hit its 1.8-million unit delivery milestone for the year, then margins ramp back up in 2024.
“With this delivery beat, we believe the sum-of-the-parts story for Tesla is another step towards coming into play with its newly released supercharger network OEM [original equipment manufacturer] deals, energy business, AI driven autonomous path, unmatched battery ecosystem, and increased production scale/scope globally adding to the Tesla golden EV success story.”
Chinese EV manufacturer BYD is also experiencing impressive gains. Bloomberg reports:
“BYD gained ground on Tesla in fully electric vehicle sales, almost doubling deliveries to 352,163 units in the second quarter. The Shenzhen-based company’s total sales soared 98% from a year ago. The company sold a record 251,685 new-energy vehicles in June. Smaller Chinese upstart Li Auto Inc. posted a new monthly high of 32,575 deliveries, while Xpeng Inc. and Nio Inc. saw modest increases.”
Incidentally, Warren Buffett held almost 10% of BYD in Berkshire Hathaway as of early May, but he has been reducing his stake in it. As for Tesla, my take is that the brand essentially created the EV category. It had a near monopoly, but now the EV dance floor is wide open. It will lose market share at a generous clip, and there’s no guarantee that it will win the EV marathon.
I would guess that the Chinese manufacturers will take China and much of Asia’s market share. They will leave some scraps for Tesla there. I see meaningful headwinds for Tesla, but I could be wrong.
Dale Roberts
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