Tesla shares had a roaring 2023, as they more than doubled in the 12-month period but it seems that winter has set in for the share because Elon Musk’s firm has lost more than $94 billion in market valuation in only the first two weeks of 2024.
The electric vehicle (EV) giant, based in Austin, Texas, has been bombarded with negative news. These include yet another price cut for its cars in China and swelling labour costs, among others.
Tesla’s stagnating growth
Moreover, slowing sales growth of cars, especially EVs, has painted a gloomy picture on Tesla and other car makers.
“The main concern for investors about Tesla is its stagnating growth,” said an analyst tracking the car sector.
The price cuts in China are also a major concern for Tesla because it seems “a rat race to the bottom for the EV industry,” added the analyst.
Tesla’s 12 per cent fall in market capitalisation since the beginning of January is the worst since January 2016, when the stock plummeted 14 per cent in just nine trading days. And, worse is that a turnaround does not look a possibility, at least in the near term.
Price cuts of no help for Musk firm
Tesla has been cutting prices of its cars continuously and aggressively for the entire 2023 in a bid to give a fillip to sales.
But this move has not reaped any benefit for Musk’s firm, and instead, it has led to a steady erosion of its once-hefty profit margin.
An investment expert said, “Price cuts and falling margins are because of these unfavourable competitive dynamics.”
Tesla to suspend production in Germany
There were more woes in store for Tesla. It had to re-route shipments for its Berlin unit after Western military actions and security issues in the Red Sea region recently.
There are also reports that it will suspend production activity at its Berlin plant from January 29 to February 11, 2024.
Weak demand for Tesla cars
Tesla had first sensed the fall in EV demand during its third-quarter numbers in October.
This had a ripple effect and automakers and suppliers across the globe echoed their downbeat forecasts.
Recently, Tesla revealed its fourth-quarter delivery figures. They had beaten analysts’ expectations but the company went behind China’s BYD in global electric car sales.
The results have been a rude awakening for Tesla investors. Last year, Tesla stock was the eighth best performer in the S&P 500 index. But this year, it plummeted to the eighth worst.
Musk’s wealth shrinks
Elon Musk has taken a big hit — he garnered more wealth in 2023 than anyone else globally. However, he saw his net worth shrink by $23 billion so far this year.
Amazon’s Jeff Bezos is swiftly closing in with $179 billion compared to Musk’s $206 billion wealth.
E-Vroooom’s views
Tesla has come a cropper so far as fully autonomous cars and artificial intelligence (AI) commitments are concerned as these are already embedded in its valuation.
Just being another EV maker now will not help Tesla reach a valuation of $750 billion, which it has targeted.
Even as Tesla loses $94 billion as EV winter sets in, innovation is the key as it has to be very different from other electric vehicle makers and deliver on its promises (its biggest failure so far) to get back to its pinnacle days.
No comments:
Post a Comment