Will Elon's India Bet Reverse Tesla's Fortunes? Trade Your Assumptions Either Way With TSLL and TSLS

Telsa TSLA recently released its first quarter 2024 earnings report, which fully reflected several challenges the firm faced that could continue throughout this year. Arguably, many investors are now at an inflection point with Tesla, as they must assess whether the firm can maintain its leadership in an increasingly competitive electronic vehicle (EV) market or accept Elon Musk’s new narrative of the firm. 

A Changing EV Market

Tesla reported a 9% drop in total revenue for the quarter, with vehicle deliveries for the period being 386,810 versus 422,875 a year prior. Net income dropped 55% to $1.13 billion, or 34 cents a share, from $2.51 billion, or 73 cents a share, a year ago. While the decline in sales has been attributed to supply-chain disruptions from the Red Sea conflict and an arson attack at Gigafactory Berlin-Brandenburg, there is also a shift in demand and the competitive landscape impacting Tesla.

Telsa's first-mover advantage as an EV automaker garnered it much success in its earlier years. At present, the competitive landscape is very different. The fervor around EVs has seemingly declined as American automakers, such as General Motors GM and Ford F, have revised their stated EV goals. Last year, GM announced they would abandon their target of building 400,000 electric vehicles by mid-2024, citing slow demand for EVs. Similarly, Ford announced a reduction in its production of its F-150 Lightning pickup truck, as demand for EVs has been lower than expected.

While such demand  is softening in the U.S., competition is arising from the world's second-largest economy, as Chinese tech company BYD announced plans to expand its EV sales outside of China. Due to government policy actions, BYD cannot access U.S. and European markets. The Chinese automaker is bolstering overseas sales by moving production to regions perceived as more friendly. Already, the company has factories in Thailand, Brazil, Indonesia, Hungary and Uzbekistan in the works.

Finally, from a consumer standpoint, there has been a noticeable shift towards hybrids, as they allow drivers to alternate from gas to battery power to maximize efficiency. Hybrid vehicles minimize ‘range anxiety,' the driver’s fear that a vehicle has insufficient energy storage (i.e., battery capacity) to cover the road distance needed to reach its intended destination. 

Tesla's New Narrative

Tesla has indicated it will prioritize self-driving robo-taxis to pull itself out of its current sales slump, eschewing an alternative option of producing a long-promised inexpensive car that many investors have been counting on. To drum up interest in this new endeavor, Tesla is trying to get prospective customers interested in its self-driving software by cutting prices and offering free trials to first-time buyers. The software, branded as full self-driving (FSD) although it does require human supervision, is sold as a subscription for Tesla owners. Recently, Tesla cut the annual price for FSD from $12,000 to $8,000 a year. However, it should be noted that U.S. prosecutors are examining Tesla's claims about their vehicles ‘ self-driving capabilities.

Other initiatives being actioned by the firm include advertising and expanding into India. Given the automobile industry’s competitiveness and that many other carmakers spend large sums on advertising every year, Tesla is taking a more consumer-facing approach to reverse its sales declines. While its India expansion might pay dividends down the road, given the country's size, it is still too early to see any material impact in the coming months.

Gaining Short Term Exposure To TSLA With Direxion

For traders looking to gain leveraged or inverse exposure to Tesla., Direxion's Daily TSLA Bull 2X and Bear 1X Shares – TSLL and TSLS, respectively – offer high risk exposure to the stock, in either direction. These daily leveraged and inverse ETFs enable investors to gain exposure to the stock’s movements, with daily investment results, before fees and expenses, of 200% and 100% of the inverse (or opposite), respectively, of the performance of the common shares of Tesla, Inc. TSLA. 

Whether bullish or bearish on Tesla’s current actions and future prospects, these ETFs present an opportunity to engage with the corporation's growth patterns easily. However, it’s crucial to approach these leveraged products with a clear understanding of their risks. While the amplified exposure can translate to significant gains, it can also lead to substantial losses. These ETFs are best suited for those who can actively manage the inherent risks of leverage and are looking to capitalize on short-term trends occurring with the firm.

Featured photo by Austin Ramsey on Unsplash.

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The Fund has derived all disclosures contained in this document regarding Tesla, Inc. from publicly available documents. In connection with the offering of the Fund's securities, neither the Fund, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Tesla, Inc. is accurate or complete. Furthermore, the Fund cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Tesla, Inc. have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Tesla, Inc. could affect the value of the Fund's investments with respect to Tesla, Inc. and therefore the value of the Funds.

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Tesla Investing Risk – The trading price of TSLA has been highly volatile and could continue to be subject to wide fluctuations in response to various factors. The stock market in general, and the market for technology companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies.

Tesla, Inc. Investing Risk – Tesla, Inc. faces risks associated with future growth and success of consumers’ demand for electric vehicles; increasing competition; variability in the market for electric vehicles; potential delays in developing and launching new products; mismatches between supply and demand for the products; charging networks may be difficult to establish; product liability claims; cyberattacks; financial costs; system security and data breeches; as well as the risks related to the fact that communications from Mr. Musk to the public may significantly impact the trading price of TSLA.

Automotive Companies Risk – The automotive industry can be highly cyclical, and companies in the industry may suffer periodic operating losses. Automotive companies can be significantly affected by labor relations, fluctuating component prices and supplier disruptions.

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