Tesla's Troubles: Why the Electric Car Giant is Losing Value
Tesla, the Giant electric car manufacturer, has seen a drop in its stock in recent weeks as investors are concerned about the company's ability to execute its ambitious growth plans. The stock has dropped by over 40% in the past weeks.
The reason for why the drop in Tesla's stock can be attributed to a number of factors, including the company, which faces strong competition from other car manufacturers and a slowdown in the electric car market.
At this stage, it is perceived that Elon Musk's tweets are the main reason for Tesla's stock losing a lot of value this year. However, the recent sharp drop in Tesla's stock prices indicates that the troubles within the company go beyond social media.
Investors are now worried about negative sales and profit forecasts for Tesla due to a drop in demand.
The company recently announced rare sales, offering discounts to buyers who receive the car by the end of the year. Tesla typically charges high prices for its products due to their exclusivity.
There is also the possibility of a recession in the United States, which could impact car sales. Musk also expects a "severe recession" to occur in 2023, which could affect demand for homes and vehicles.
Critics Question The Validity Of Tesla's Trillion-Dollar Valuation
One issue related to Tesla's stock price is that some people question whether there is justification for it reaching a trillion-dollar valuation at the beginning of the year. At its peak, Tesla was worth more than the combined value of the top 12 car companies in the world, despite having much lower sales. Today, the company is valued at $385.89 billion, leading some industry experts to believe that Tesla's valuation may be inflated due to the hype surrounding Musk and the company's ambitious plans.
The rapid increase in the stock price, which rose nearly 1400% by the end of 2021, was fueled by Musk's reputation as an innovative thinker who could disrupt the traditional car industry.
In addition, Tesla's failure to achieve its targeted sales growth this year has cast doubt on its ability to achieve long-term growth targets.
While Musk and his supporters remain confident in the company's future, others are skeptical about its ability to reach the levels of success that were previously expected.
It is possible that Tesla will recover and achieve greater success in the future, but it may take a long time and a lot of hard work to get there, as the company faces fierce competition and a rapidly evolving automotive industry.
Tesla's Cybertruck Production Delayed Until Next Year
Critics argue that Tesla's high valuation is based on the promises made by Elon Musk about future products, many of which have been delayed for years. One example is the Cybertruck, Tesla's electric pickup truck that was unveiled three years ago with a promise that production would start in 2021.
However, production has now been pushed back to next year, with an expected delivery date of 2024. This puts Tesla behind other electric pickups from Ford and Rivian.
Gordon Johnson, one of Tesla's most vocal critics among analysts, tweeted on this issue, saying: "Elon Musk has pathological troubles with the truth. When people say he's a genius and innovative, it's based on all these promises he never kept."
Johnson believes that Tesla's stock will continue to drop as it is priced like other car manufacturers, rather than on promises. He also pointed out that in order for Tesla to achieve its growth targets, it needs to build approximately one new factory per year. Still, its new factories in Germany and Texas are not operating at full capacity yet. In addition, its factory in China was forced to reduce production due to weak sales amid COVID-19 restrictions.
How Twitter And Musk's Stock Sales Are Affecting Tesla's Value
Twitter has also played a role in the decrease in Tesla's stock price this year since Musk first showed interest in Twitter in April. Tesla's stock has lost approximately 65% of its value since the news was announced.
In a Twitter Spaces interview, Musk promised not to sell Tesla stock until at least 2024. Despite this, he has sold $14.4 billion worth of Tesla stock since April.
Musk's $44 billion Twitter deal has led to him selling $23 billion worth of Tesla stock, which has caused investors to lose hope as Musk has used a significant amount of his Twitter purchases to pay for these sales.
Earlier this month, Musk sold $3.6 billion worth of Tesla stock, leading to concerns about his focus on the electric car company.
Another factor related to Twitter is that Musk is also the CEO of the platform, which has caused a stir on the social media platform since he took over in October. This has caused some people to believe that Musk's focus on Twitter may have caused Tesla to lose credibility and potentially also lose large investors in the company.
Musk has also laid off thousands of employees from Tesla, and allowed previously banned accounts to reappear on the internet. These actions have angered potential buyers.
Critics' Concerns About Tesla's Future
Critics of Tesla have expressed concerns about the company's future due to several factors. One of the main concerns is the reputation of CEO Elon Musk for not keeping his promises, which has caused some to doubt the validity of Tesla's high valuation, which is based on promises about future products that have yet to bear fruit.
Another source of anxiety is the company's need for continuous expansion in order to meet its growth goals. To do this, Tesla needs to build new factories almost every year, but its new factories in Germany and Texas are struggling to operate at full capacity, and its factory in China has had to reduce production due to weak sales amid Covid restrictions.
The decrease in demand and excess capacity in Tesla's factories is also a source of concern. Demand has collapsed in the United States, and the company building more cars than it sells for the third quarter in a row is a clear sign of excess capacity.
Tesla is also facing increasing competition from other electric vehicle manufacturers, including well-known car companies like Ford, as well as newcomer EV manufacturers such as BYD. This adds to concerns about the company's future.
Musk predicts a "serious recession" in 2023
It is possible that an economic recession could have a significant impact on Tesla. CEO Elon Musk has predicted that there will be a "serious recession" in 2023, and economists have suggested that a recession could happen as early as next year.
In times of economic downturn, certain industries are disproportionately affected, and both the housing and automotive markets will likely be hit hard.
For Tesla, a recession could potentially mean a decline in demand for its electric vehicles. During an economic recession, consumers may be more hesitant to make big-ticket purchases such as cars and may opt for cheaper, more practical options.
Additionally, a recession could lead to job losses and wage cuts, which could further decrease the number of people able to afford high-end vehicles like Tesla.
On the other hand, it is worth noting that electric vehicles (EVs) may be seen as more appealing in a recession due to their lower operating costs compared to traditional gasoline vehicles. This could potentially help to offset some of the declines in demand for Tesla's vehicles.
Overall, the potential impact of an economic recession on Tesla is difficult to predict with certainty. However, it is clear that a recession could potentially have a significant impact on the company and the demand for its electric vehicles.
Despite all of these challenges, Tesla remains a highly innovative and influential company in the automotive industry. The company's success in popularising electric vehicles and pushing for sustainable transportation solutions has inspired other automakers to follow suit and invest in their own EV lines.
In addition, Tesla's advancements in autonomous driving technology and renewable energy solutions have solidified its position as a leader in the industry.
As with any company, Tesla must continue to adapt and overcome challenges in order to maintain its success.
The company's reliance on Musk's reputation and promises for future products may not be sustainable in the long term, and it will need to deliver on its growth targets and continue to innovate in order to justify its high valuation.
As Tesla navigates the uncertain economic landscape and increasing competition, only time will tell if the company will be able to continue its impressive growth and solidify its place as a top player in the automotive industry.