If Tesla is facing “Demand Destruction”, where are the demand triggers?

Many industry watchers claim that Tesla is facing “demand destruction,” but if that’s the case, why isn’t Tesla triggering some demand triggers?

In a new note to clients this week, Morgan Stanley analyst Adam Jonas, one of the top analysts covering Tesla, noted that he believes Tesla is experiencing “demand destruction” on margins:

Is Tesla experiencing demand destruction? Very likely at the margin, although this will translate into shorter delivery times and lower prices in the coming months as even EV customers may feel the effects of inflation/buyer strike fatigue.

He lowered the firm’s expectations for the company.

Another analyst who has been tracking Tesla’s order backlog believes they just hit a near two-year low:

This suggests that demand for Tesla has dropped significantly, but as we previously reported Waiting time tracking can be deceiving when Tesla moves production to different regions.

Is demand for Tesla a problem?

If demand was an issue for Tesla, we would start to see some demand triggers being triggered, which they are not.

The biggest drag is usually pricing. Tesla’s prices have been rising for the past two years, and its gross margin per car is at an all-time high.

The automaker could afford to drop prices a bit, which would be a significant driver of demand, but that hasn’t happened yet.

But now there is another complication; new EV tax credit.

Tesla buyers can technically regain access to the $7,500 tax credit when they take delivery next year. There are many factors that limit access to credit, but this could have a significant impact on demand for the cheaper Model 3.

As we’ve previously reported, Tesla doesn’t accept eligible buyers like other automakers, so it could experience some cancellations as contracts expire and some buyers decide to wait until next year.

Electrek’s Take

In short, I don’t think you should worry about Tesla’s demand until you start seeing the automaker use some demand leverage.

But even then, these demand levers are likely to be quite successful and solve the problem.

If Tesla does start to see demand slow, especially in the US, I think we could see the automaker finally bring the standard range Model Y to market, and demand for it will likely be unlimited, especially with the tax credit.

What do you think? Let us know in the comments section below.

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