There is 'still a place' for Tesla in China, analyst says

Shares of Tesla (TSLA) are rising as the company beat vehicle delivery estimates for its second quarter. Barclays senior autos analyst Dan Levy joins Morning Brief to give insight into Tesla's performance and whether the fear of slowing EV demand is coming to an end.

"Certainly, the competition is going to be tougher in China, but there is still a place for Tesla in China. We still see them hold share fairly steady in that high single-digit range as a percent of total EV sales. So they've actually held steady. But certainly, the competition is intense," Levy tells Yahoo Finance.

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This post was written by Nicholas Jacobino

Video transcript

We are watching shares of Tesla this morning, the EV Giant delivering 440,000 vehicles beating expectations of 439,000 for second quarter deliveries is the fear of slowing the demand coming to an end here, here to weigh in on that.

We've got Dan Levy Barclays senior equity research analyst, Dan, thanks so much for being here.

Is this a sign that the price cuts kind of worked for Tesla?

Uh Hi Madison, thank you so much for, for having me.

Uh I think today's result was certainly an upside surprise.

We had previewed 415,000 units.

I think what's interesting about this result was we certainly saw some impact of price cuts in the quarter.

You look in the US, you had the 1% financing in May among y that likely had a key role.

There was additional discounting as as well.

There may have been some other levers that occurred throughout the, the the end of the month that helped drive this.

Um but look, there is still the risk of further price cuts ahead and there is still further question on fundamentals we are still facing somewhat of an ev winter on demand, so good result.

But I think the fundamental macro backdrop is still the same.

How, how deep do you think price cuts could be?

Well, I think that Tesla is taking maybe AAA more, you know, um measured approach on price cuts after what happened last year where they cut very aggressively, but they didn't stimulate the type of demand that they had hoped.

I think they've likely shifted strategy to not be as overt with the price cuts.

And so this is why you've seen price cuts on things like via uh you know, special financing or inventory vehicle sales, uh other benefits as well as opposed to outright price cuts.

There are levers to be, you know, to, to uh unlock pricing without having outright open price cuts that maybe are a bit more damaging to the residual values.

I want to talk about the China of it all because we are seeing continued success for the Chinese ev makers particularly in that market.

Of course, how much does Elon Musk need to be worrying about that?

Listen, China is probably the most competitive region for Tesla.

That's the region where they are facing the, the toughest competition they're facing competitors that have products that are uh just as good as Tesla.

Some would argue even better from a software defined standpoint.

Tesla certainly doesn't have the same advantage in China that they have in uh in the US or Europe so certainly the competition is going to be tougher in China, but there is still a place for, for Tesla in China.

We still hold, seen them hold share fairly steady in a high single digit range as a percent of total uh BEV sales.

So they've actually held steady but certainly the competition is intense.

Ok, we kind of got a little bit of a breakout or at least a, a murky number for us to think about with regard to how many cyber trucks they're, they're producing and delivering.

And I know it's early in the game right now for Tesla with regard to this.

But what do you think the reception and, and what we're seeing in these delivery numbers for Cyber truck, which is really just kind of looped into those other models that also include the S and the X.

But what does this tell us about what type of run rate and, and growth we should expect for that part of the business?

Cybertruck is still pretty niche for the business.

The vast majority of the volume is still being driven by models three and why those are more of the sort of mass market type options for Tesla.

Um They are ramping on Cybertruck, but right now, it is still supply constrained.

I think we should have a better sense later in the year and into next year.

Once the supply can restraints are eased once they can rent more rapidly to see what the underlying demand is.

We think it's a fairly niche model.

We think it's gonna be, you know, something in the ballpark of 50,000 units a year, which helps, but it's still a very small portion of uh the total volume for Tesla.

All right, Dan Levi, who is the Barclays Senior Equity research analyst, Dan, great, so much, uh great to have you here with us.

Thanks so much for taking the time.

Thank you so much, Brad Madison.