Tesla will announce its Q1 results tonight. Should we go long or short? I've already placed an order.

I. Delivery and Production Dilemma: Weak Demand and Structural Contradictions Highlighted

$Tesla(TSLA.US) Q1 2025 deliveries fell 13% YoY to 336,700 units, the lowest level in three years, significantly below the market's lower expectation of 377,000 units. This decline is mainly due to production line shutdowns caused by the Model Y facelift and the risk of product lineup homogenization (Model 3/Y account for over 95%). Notably, declining capacity utilization has led to an inventory backlog of 26,000 units, while delays in low-cost model development further weaken market confidence in demand recovery.

From a regional perspective, European sales plummeted 40% YoY, deliveries in China dropped 28.7%, and U.S. domestic sales have contracted for four consecutive months. This reflects peak incremental demand for EVs globally, compounded by traditional automakers accelerating their electrification transition (e.g., Volkswagen's ID. series, Toyota's bZ4X), intensifying competition for Tesla.

II. Profit Pressure: Double Whammy on Gross Margin and Cash Flow

The automotive gross margin is expected to drop to 15.8%, the lowest since 2017, with the core issue being the dual squeeze of price wars and rising costs. Tesla's Q1 average selling price (ASP) fell to around $40,000, down 4.7% YoY, while the U.S. imposing 25% tariffs on imported cars has sharply increased supply chain costs from China. Coupled with rising AI infrastructure investments, operating cash flow turned negative for the first time.

By segment, energy storage is the only bright spot: Q1 added 10.4GWh of capacity (up 156% YoY), with Shanghai factory mass production driving gross margin to 25.2%, significantly higher than the automotive business. However, this segment accounts for only 12% of revenue, insufficient to offset automotive profit declines. Additionally, carbon credit revenue rose to 15%, exposing the fragility of core business profitability.

III. Short-Term Risks: Policy Shocks and Deteriorating Market Sentiment

1. Escalating Political Risks
Elon Musk's deep ties with the Trump administration have triggered consumer boycotts, with European market share plunging from 17.9% to 9.3%. More critically, the U.S. imposing 145% tariffs on Chinese components has halted key part imports for Cybercab and Semi trucks, delaying new model production.

2. Earnings Expectations and Market Sentiment
Analysts expect Q1 revenue of $21.54 billion (up 1.1% YoY), but actual results may be dragged down by inventory write-downs, with EPS potentially below the expected $0.37. Options market implied volatility reached ±10.96%, while short ETF holdings (e.g., TSLQ) surged, reflecting fears of an earnings bomb.

3. Valuation Bubble Risk
Tesla's current TTM P/E of 111.52x far exceeds the S&P 500's 25x. If Q1 net profit hits $500 million (down 56% YoY) as estimated by Snowball, valuation pressure will intensify.

IV. Long-Term Narrative: Tech Transition and Strategic Overhaul

1. Strategic Value of Energy Storage
Tesla's Shanghai energy storage factory boosts annual capacity to 80GWh, aided by U.S. Inflation Reduction Act tax credits. 2025 storage revenue may exceed $14.1 billion (up 60% YoY), with high margins (25-30%) and policy tailwinds making it a core hedge against automotive volatility.

2. AI and Robotaxi Bet
Musk announced Robotaxi details for August and Optimus humanoid robot trial production this year. Despite regulatory hurdles for unsupervised FSD, Tesla's data advantage (30+ billion miles of real-world driving data) remains a moat. Robotaxi mass production by 2026 could unlock a new growth pillar of 2M units/year.

3. Supply Chain Resilience
Tesla is accelerating Mexico factory construction to achieve 70% local parts sourcing, mitigating USMCA tariff risks. Meanwhile, Texas lithium refinery operations will reduce reliance on Chinese battery supply chains.

V. Investment Strategy

I get it—most just skim the fundamentals and focus on whether to buy the dip.

I went long during night trading at around 227.

Key rationale:

1. 227 is a strong short-term support level; unlikely to break pre-earnings.

2. At Tesla's current level, many expect "bad news priced in" and may gamble on earnings, likely causing a intraday pump—a good exit opportunity. Earnings gamble? Hardly. Even if results are bad as expected, don’t forget forward guidance.

As for FSD and Robotaxi, Musk hyped them during the annual report—let’s see how much materializes this time.