Morning Update

Equity markets were lifted by energy stocks yesterday after oil rallied following OPEC+ announcement to cut oil production by over 1m barrels per day. This saw the S&P 500 energy sector index rise close to 5% while giants including Chevron and Exxon Mobil appreciated more than 4%.

In the US, this saw the S&P 500 gain 0.37%, while the Dow Jones climbed just shy of 1%. Meanwhile the teach heavy Nasdaq lost just over a quarter-of-a-percent with Tesla’s 6% slump weighing down the index.

Over Q1 2023, the S&P 500 rallied 7% while the Nasdaq soared 17%.

In a similar fashion to the US, the FTSE 100 was buoyed by an uptick in energy stocks which saw the blue-chip index rise around half-a-percent. Here, BP and Shell rose over 4%. On the continent however, fears over the implications that rising energy prices could have on inflation saw the Stoxx 600 end the first session of the week more or less flat.

Despite a series of price cuts, investors remained underwhelmed at Tesla’s modest 4% rise in quarterly sales raising questions over whether further price cuts would be needed in order to gain more of the mass market. Data also indicated that in the last 12 months Tesla produced 78,000 more cars than it has sold with subsequent investor concerns seeing Tesla’s stock fall 6%.

Tesla continues to be the most valuable car company, but investors remain unconvinced at Musk’s plans to tap into the mass market. For example, earlier this year, investors remained unenthused atter Tesla unveil a hotly anticipated smaller, lower price car to enable them to capture more of the market. This comes a few years after Musk unveiled Tesla’s hopes to develop a cheaper proprietary battery – the 4680 – which he claimed would enable the company to deliver a car for around $25,000 by 2023. Nevertheless, production of the 4680 batteries has failed to gather sufficient steam, and the company have just unveiled plans to move their battery production chiefly to the US, from Germany to further boost production.

Tesla’s electric cars currently have base price ranges between $43,990-$129,990 with the Model 3 – which has a range of 267 miles – being the least expensive. Thus, investors consider Tesla’s ability to bring the entry level price down as critical to tapping into the mass market. According to the Guardian: “Tesla’s chief financial officer, Zach Kirkhorn, estimated the company would need to invest six times more than it has to date to hit its long-term target of increasing output to 20m vehicles annually, a 10-fold increase from current capacity. The bill could be $175bn, he said. Capturing the mass market is critical to Tesla’s goal of increasing deliveries 15-fold – to 20m vehicles – by 2030.