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Tesla EV deliveries are 'a testament' to its ability to manage supply chains: Analyst

Deutsche Bank Lead Auto and Auto Technology Analyst Emmanuel Rosner joins Yahoo Finance Live to discuss Tesla CEO Elon Musk's 9.2% stake in Twitter, Tesla's record-breaking EV deliveries, pricing power, and supply chain concerns

Video Transcript

BRIAN SOZZI: OK, Tesla said it delivered a little more than 310,000 vehicles in the first quarter, a modest increase from the previous quarter, and a 68% increase from a year earlier. But the results fell a touch shy of some Wall Street estimates as Tesla CEO Elon Musk said in a tweet, this was a quote, "exceptionally difficult quarter due to supply chain interruptions and China's zero COVID policy." Let's dive into Tesla with Deutsche Bank auto analyst, Emmanuel Rosner. Emmanuel, good to see you here this morning. Definitely want to touch on these delivery numbers. But first, this news that Musk is now a major stakeholder in Twitter. Do you think this will cause him to take his eye off the ball on what he's trying to develop at Tesla? EMMANUEL ROSNER: Good morning. Thanks for having me. I don't think so. I think Tesla has had his hands into many different exciting projects for a fairly long time, has actually demonstrated the ability to both provide a vision for Tesla while doing it so for so many other companies. And I think at this point, he's also built a very strong team at Tesla. It's no longer just a one-man show. He provides a vision, but it's executed quite well. So I don't believe that this is something Tesla investors should have to worry about. JULIE HYMAN: I mean, as we talked about earlier, it seems like you know, there's the sort of Tesla, Elon Musk Twitter persona, and then there's him actually running the company. And it seems like that those are two different things. Emmanuel, what do you make of what we've been seeing in Shanghai with some of the lockdowns, and the fact that Twitter was still able to come out with these delivery numbers. How did they navigate that? EMMANUEL ROSNER: Yeah. No, this is extremely impressive. So as you mentioned, the 310,000 units was essentially in line with Street expectations, we were slightly higher than that, but they achieved that despite being shut for the last week, which is not just a full week. So the last week of the quarter where they usually cram all these local deliveries you know, to try to make numbers. And so this has been a critical week. They were shut down. It really shows that they were tracking ahead of this before that, which had been essentially our expectation. More broadly, we've seen Tesla execute incredibly well in a challenging supply chain environment as well. If you sort of think about this year over year growth that you mentioned, you know, 68% or 70%, when global auto industry is down so much on a year over year basis, it's truly a testament to Tesla's ability to secure the supply, to integrate vertically when needed, to essentially make sure that it has all the pieces needed to continue to operate, which it's been doing quite well for the last 18 months or so. So it's a continuation of this and makes us very optimistic for the rest of the year. BRIAN SOZZI: The costs, Emanuel, to produce the batteries that go in Tesla's cars, those components that go in those batteries have really inflated here of late. How big a risk is that to Tesla's bottom line? EMMANUEL ROSNER: So we've had this exact conversation with Tesla not that long ago, and we sense some pretty strong conviction from the company that it will not only be able to offset these raw materials pressure through pricing, but potentially more than offset it. And in fact, if you watch what has been happening, just last year, Tesla raised prices in the US on its vehicle 10 times, and then a few more times again this year in a fairly meaningful way. This has been extremely proactive and essentially anticipating this pressure, and pricing the vehicles accordingly. A lot of these price increases that were announced even late last year haven't made their way into benefiting the income statement yet. So overall, we actually feel that they will be able to maintain or potentially even improve gross margin despite this pressure in the near term. Longer-term, Tesla is also in one of the best position to benefit from very long-term contracts, sourcing contracts that have put in place. So they really have strategic partnership with some of these suppliers. And also with the ability to control their own-- the chemistry of their own batteries and essentially move it away from some of these expensive components as needed. So we feel both short term and long term they're probably one of the best-positioned automaker to deal with this input cost pressure. JULIE HYMAN: Emmanuel, on a related note, is there a ceiling for what Tesla can charge for the Model 3? EMMANUEL ROSNER: I assume there is. There's always a ceiling for you know, the price of things. But what's interesting is if you watch the wait time to get a vehicle if you place an order today or if you wanted to place an order last week, these wait times have essentially been getting longer, not shorter. And that's globally and that's across models. So Tesla is monitoring these very, very closely as well. It essentially has a real-time feedback loop into can it keep increasing pricing or not? The day you know, these kind of wait times will start getting shorter, they will get a pretty strong signal that they've probably pushed it as far as they can. This is absolutely not the case right now. As I said, it keeps getting longer. Almost any model you'd want to order right now, you would have to wait at least six to nine months, in some cases even much more than that. And that's despite all these announced price increases. So I assume you know, drivers go to the pump, see what the shock is, sticker shock in terms of gas prices, and EV still makes sense even at a higher price point but you know, it will eventually come to an end. So far there's no indication of this. BRIAN SOZZI: I think it was your note, Emmanuel, that pointed out Tesla's raised prices what, 10 times of late? How many more times do you think Tesla will increase prices this year? EMMANUEL ROSNER: It's tough to say honestly because it's both-- they're not doing it just in a reactive way like we've seen price-- input prices go up and they just increase price reactively. They truly are doing this proactively. And I think it's back to my last answer here, which is they're doing it in a very proactive opportunistic way, they're monitoring the response, the market response to these price increases, and will probably keep doing it as long as they're not seeing any demand deterioration. And so it will partly depend on what the consumer response is to it. As long as it's not hurting you know, the wait times I think that Tesla could keep passing on some. It's also a broader question around the strength of the consumer. Obviously, if we start seeing some consumer confidence deterioration in the US, but also in Europe or any of the other large markets for Tesla, I think that this is something that would potentially hurt their ability to do so. But as I said, as of today, you know, the wait time for vehicles keep getting longer. And so that's a signal to Tesla that they can pass additional ones as needed. BRIAN SOZZI: Really appreciate the insights. Deutsche Bank auto analyst, Emmanuel Rosner. Good to see you.