Goldman Sachs says that Tesla (TSLA) could sell up to 20 million electric cars per year in a new note to clients.
I am extremely bullish and long on Tesla and EVs, but they’ve got it wrong.
Goldman Sachs’ Tesla (TSLA) note
Goldman Sachs analyst Mark Delaney has released a new note to clients today about Tesla.
The firm is just now turning positive on the automaker and significantly increased its price target from $455 to $780 per share.
In the note, they say that they are basing their increase on a faster-than-anticipated shift to electric vehicles:
We believe that the shift toward battery electric vehicle (EV) adoption is accelerating and will occur faster than our prior view. We believe that battery prices are falling faster than we previously expected which improves the economics of EV ownership, and there has recently been an increase in regulatory proposals from some jurisdictions to limit or ban the sale of new internal combustion engine (ICE) vehicles entirely in 10-20 years. As a result, in conjunction with our global colleagues, we are raising our outlook for EV adoption and now expect EV to comprise 18% of sales globally in 2030 and 29% in 2035 (with 50% adoption in 2035 in both US and in Western Europe).
In this faster shift, they believe that Tesla could maintain a “mid to high 20% range share of the EV market” and sell up to 20 million cars per year:
If Tesla sustains its mid to high 20% range share of the EV market, then it could reach 15 million units by 2040 (and about 20 million under our upside-case EV market adoption scenario). To the extent that the industry continues to shift toward EVs more quickly than we anticipate, or if Tesla is able to take share in the market, then we believe that there is a possibility Tesla reaches these types of volumes more quickly.
The note sent Tesla’s stock up more than 3% in after-hours trading after the price went down yesterday.
I am a big Tesla bull and long on TSLA, but I think these analysts are out of their minds.
They are just scrambling to increase their price targets because the stock has been surging already due to the announcement of the S&P inclusion and now using flawed logic to justify those increases.
In this case, I believe Goldman Sachs is wrong on both their main theories.
EV market shares will be way higher than 18% in 2030. Heck, it will probably be higher in 2025.
I believe there will be a massive shift in demand in the next five years where every new car buyer will realize that it would be a dumb decision to buy anything other than a vehicle with an electric powertrain.
However, I don’t think that the automotive production capacity will be ready for this shift. Therefore, I don’t think 100% of new cars will be electric within the next five years, but I can’t imagine anything less than 75% EV market share by 2030 or four times higher than Goldman’s ridiculous prediction.
As for Tesla’s market share in 2040, I don’t believe it can maintain a 20% market share as the EV market grows. We have seen what happens to Tesla’s market share in markets where other automakers focus their EV sales, like in Norway.
It’s a far from perfect example because it’s a small market that has been highly targeted by new EV launches, but the same thing is going to happen to a smaller degree in bigger markets as more automakers launch compelling electric vehicles.
It also doesn’t hurt that Norway has almost ubiquitous charging options for all EVs, not just Superchargers.
Honestly, I can’t begin to imagine what kind of logic Goldman Sachs is using to believe that Tesla can maintain this kind of market share in a rapidly growing EV market with more entries every other week, and that’s coming from a big Tesla bull.
I believe that Tesla will be closer to 10-15% market share by 2030, and that’s OK. They will be selling over 10 million electric cars per year, and most likely be the largest automaker by volume.
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