Tesla’s (TSLA, Financial) stock price increased 18.2% in the quarter as its electric car deliveries and production ramped up following COVID shutdowns in Shanghai. Its two new production plants in Austin, Texas and Berlin, Germany continue to increase production, and demand for its cars remains strong. We expect both factories, as well as an expansion of its factory in China, to become profitable during the next 12 months. Despite the company implementing price increases to offset higher input costs, Tesla has seen no change in robust demand levels. Management indicated that production continues to ramp, and they expect to be at a run-rate of 40,000 cars per week by the end of the year. We believe production and deliveries should accelerate next year helped by increased capacity in Shanghai, Berlin, and Austin. This is despite continued supply-chain issues, principally for computer chips and battery cells. Tesla is benefiting from its vertical integration and having its own battery cell manufacturing facility. Tesla’s share price increase helped the Fund’s performance by 325 bps in the quarter. Tesla remains the Fund’s largest holding and, at quarter end, represented over 22% of the Fund’s net assets.
Tesla, Inc. manufactures electric vehicles (EVs), related software offerings,solar and energy storage products, and battery cells. Shares rose on increased production volumes from Tesla’s global factories, new full self-driving functionality, manufacturing techniques that improve quality and reduce costs, and industry-leading margins despite complex COVID-related shutdowns. A new federal tax incentive program should also provide material benefits for Tesla’s differentiation, margins, and demand. We remain investors in this uniquely innovative company leading the EV revolution.
From Ron Baron (Trades, Portfolio)'s Baron Focused Growth Fund third-quarter 2022 commentary.