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Baird reaffirms Tesla's Overweight rating and $252.00 price target. The firm also confirms that the company remains its “best pick” after it announced another round of price cuts and the construction of a Megapack factory in China.

Tesla recently launched another round of price cuts for its vehicles in the US amid macroeconomic uncertainty. Some analysts expressed their concerns in this regard. However, Baird remains confident that Tesla will be able to maintain industry-leading operating margins and is in the best position of its peers to withstand the current economic hurdles.

According to investing.com, analysts wrote in a note, “US price cuts continue to make headlines with TSLA margins and macro uncertainty in focus. Despite this second round of US price cuts in a short time frame, we continue to believe the TSLA’s will be able to maintain industry leading operating margins and is in the best position among auto peers to weather economic headwinds. Speculation of more stringent vehicle emission rules may accelerate EV adoption further which we see as a tailwind in addition to the IRA on the policy front.”

Tesla's latest price cuts came shortly after the US Treasury released guidance on IRA tax credits for clean vehicles. As a result of these changes, its base Model 3 with rear-wheel drive and LFP batteries will not qualify for the full $7,500 credit. All other Model 3 and Model Y variants are expected to be eligible for full credit. Despite Tesla's price cuts, Baird analysts still believe the company is best positioned to capitalize on these credits due to its leadership in battery cell production and manufacturing technologies.

In addition, towards the end of last week, Tesla also announced a manufacturing investment. The company intends to build a Megapack factory in Shanghai, China. The mega-factory will produce ~10k units per year or approximately 40 GWh of energy storage. Baird estimates that the energy business will continue to gain momentum this quarter as demand for stationary storage grows.

In addition to this, the EPA is expected to publish new vehicle emissions regulations this week. They are designed to increase the U.S. electric vehicle market share to ~60% by 2030, up from the Biden administration's previous goal of 50%. At this point, the details surrounding the new rules have yet to be determined, but Baird believes Tesla will benefit most from stricter requirements for ICE vehicles due to its scale and manufacturing capabilities in the US.

© 2023, Eva Fox | Tesmanian. All rights reserved.

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This article is for informational purposes only. You should not construe any such information or other material as an investment, financial, or other advice. Nothing contained in this article constitutes a solicitation, recommendation, endorsement, or offer by Eva Fox, Tesmanian, or any third party service provider to buy or sell any securities or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

Eva Fox holds zero shares of Tesla, Inc., and currently (at the time of this article's publishing) holds zero options or securities in Tesla Inc. and/or its affiliates.