Tesla is on a roll, and showing other EV makers what is possible. The company priced its vehicles to be profitable at lower volumes and is currently seeing the benefit of scale, likely to be enhanced further as the manufacturing footprint grows. While the operating margin below looks very good, we would note that Tesla is not done scaling yet so there is considerable upside to the margin, most likely. One obvious conclusion from this analysis is that Tesla has plenty of wiggle room on pricing should macro conditions impact new car sales or should other EV makers try to steal share with pricing. Tesla has built a huge first-mover advantage in EVs and this will likely benefit the company for many years to come as long as they keep making vehicles that people want.
Source: Tesla – 1Q22 Results Presentation, April 2022
When we started writing our focused report on ESG and Climate issues in late 2020, one of the key conclusions was that we would see lots of pledges in 2021, but that by 2022 we would need to see vague targets translate into specific action and specific projects. While we do not yet have the regulatory clarity that we had hoped for, especially in the US, and especially around emission values/costs, we are beginning to see more granularity, and Dow remains ahead of the pack, in our view, not just based on what has been publicly announced but also based on our extensive discussions with companies and research on the key topics. It is interesting to note that Dow talks specifically about its initiatives in Canada and some of its moves in Europe, including the LNG investment at Stade, Germany. The company is vaguer about plans in the US, and we see this as a function of a more vague US landscape rather than anything Dow specific. We still believe that regions with a more robust policy around carbon values and energy, in general, will see more direct investment over the next 10 years than those sitting on the fence, whether that investment is from Dow or others.
Source: Dow 1Q22 Results Presentation, April 2022
