Investors are reassessing the assumption that Tesla’s astronomical stock price has been justified and its founder, Elon Musk, has become the wealthiest person in the world.
Tesla’s $ 1 trillion valuation is when investors believe that electric car companies are on the road to dominating the automotive industry in the way Apple dominates smartphones and Amazon leads online retail. Only made sense.
However, Tesla’s stock has fallen by more than 40% since April 4. It has plummeted far more than a wide range of markets, evaporating more than $ 400 billion in stock market value. And the fall called attention to the risks facing the company. This includes intensifying competition, a shortage of new products, a lawsuit blaming the company for racial discrimination, and serious production problems at the Tesla plant in Shanghai, which it uses to supply Asia and Europe. It will be.
Mr. Musk is not helping the stock price by turning him Bid to buy Twitter For financial soap opera. His disgust has strengthened the perception that Tesla does not have an independent board of directors that could prevent it from doing anything that could harm the company’s business and brand.
Andrew Poreda, a senior analyst specializing in socially responsible investing at Sage Advisory Services, an investment company in Austin, Texas, said: “There is almost no check and balance.”
Even long-time Tesla optimists have doubts. Daniel Ives, an analyst at Wedbush Securities, is one of Tesla’s strongest followers on Wall Street. But on Thursday, Wedbush lowered Tesla’s target price (a company’s estimate of the fair market value of its stock based on future earnings) from $ 1,400 to $ 1,000. Ives quoted Tesla’s problem in China, where the blockade constrained the supply of critical parts and materials and the demand for cars.
“China’s Tesla has a new reality and the market is reassessing risk,” Ives said.
China’s production problems have undermined one of the reasons Tesla has become one of the most valuable car companies in the world. Tesla cars are popular with Chinese buyers and are expected to grow rapidly in the world’s largest car market. Tesla’s market share in China exceeded 2.5% in the first quarter of 2022, approaching luxury automakers Mercedes-Benz, BMW and Audi.
But China’s supply chain headaches are exacerbated by flagging consumer demand, said Michael Dunne, CEO of ZoZoGo, who advises companies on the electric vehicle market.
Chinese consumers are “edgy and worried about the future,” Dan said. “Tesla is facing double pain in China.”
Tesla stocks are partially reacting to the same forces that are causing stock markets around the world, such as the war in Ukraine, rising interest rates, the threat of recession, supply chain disruptions and rising inflation. But Tesla’s stock has fallen far more than other Silicon Valley giants like Alphabet, the company that owns Apple and Google.
Tesla accounted for three-quarters of the electric vehicles sold in the United States last year. The company is several years ahead of its competitors in battery technology and software. However, two models (Model 3 sedan and Model Y Sport Utility Vehicle) accounted for 95% of Tesla’s sales. The next consumer vehicle, the pickup truck, has been postponed many times and is not scheduled until next year at the earliest.
It is an axiom of the automotive industry that new models promote sales. And competition with Hyundai, Ford, Volkswagen and more is intensifying, offering drivers even more choice.
Jesse Toprak, a veteran in the automotive industry and Autonomy’s chief analyst who offers electric vehicles on a subscription basis, said Tesla’s market share will be less than 40% by the end of 2023, but its sales will be below 40% for the market as a whole. Will continue to grow. Enlarge.
“They will have a smaller share of the larger pots,” Toprak said. “But the near monopoly on EV sales in the US will slowly decline.”
Tesla is already facing fierce competition in Europe, with electric vehicles accounting for 13% of new car sales. This foresaw what could happen in the United States, where battery-powered vehicles are just beginning to sell. Volkswagen, which has invested heavily in electric vehicles, has sold 56,000 battery-powered vehicles in Western Europe, following Tesla’s 58,000, according to figures compiled by Schmidt Automotive Research in Berlin.
Tesla’s ability to serve the European market New factory near Berlin Increase production. In the United States and elsewhere, the company has benefited from enthusiastic and loyal buyers who consider Mr. Musk a visionary person and are willing to wait months and years for his car.
But as soaring gasoline prices make electric cars more popular, the next wave of customers may not be as forgiving or engrossing as Mr. Musk. “The next generation of buyers is the average Joe who buys an EV, and it makes financial sense,” says Toprac. “The Tesla brand image isn’t very useful.”
Tesla’s image is under pressure in a way that can hurt automakers among environmentally friendly, politically liberal customers who have long been the largest customer base.California Fair Employment Housing Authority Suing TeslaHas accused racism and harassment of widespread use at its factory in Fremont, California, near San Francisco. Tesla is challenging the proceedings.
In another batter, S & P500ESG IndexA list of companies that meet specific environmental, social and governance standards eliminated Tesla last month. S & P said It was hampered by racism and poor working conditions claims at the company’s Fremont plant.
In response to S & P’s decision on Twitter, Musk said the move to apply environmental, social and governance standards to businesses was “armed by fake social justice warriors” and “fraud.”
Following his Twitter post, Musk declared that he had “became a party of division and hatred” and is now switching loyalty from the Democratic Party, who said he would vote for the Republican Party. Such a politically condemned statement is certain to keep some car buyers away.
Carla Bairo, Chief Executive Officer of the Automotive Research Center in Ann Arbor, Michigan, said:
Mr. Musk and Tesla did not respond to requests for comment.
Changing management is another risk. Musk is a notorious and demanding boss who warned Twitter employees that taking over the social media platform would “extremely expect work ethic.”
Cancellation at Tesla is obvious. Many former senior managers are famous for the San Francisco Bay Area startup scene. Examples include Celina Mikolajczak, head of manufacturing for up-and-coming battery maker QuantumScape, who previously helped develop batteries at Tesla, and Gene Berdichevsky, another former Tesla battery developer who is CEO of Sila Nanotechnologies. Shira announced this week that it will supply Mercedes-Benz with advanced battery materials.
Lucido, the only electric model maker to beat Tesla in the Environmental Protection Agency’s full charge range test for electric vehicles, Peter RawlinsonFormer top Tesla engineer, until he fell with Mr. Musk. Lucido is headquartered in Newark, California, a short drive from Tesla’s Fremont plant.
Musk’s admirers say he helped promote emissions-free cars by instilling talent in the industry. However, critics are aware of the risk that Tesla will never develop a stable hierarchy of experienced managers who can run the company if something happens to Mr. Musk.
“We can’t treat workers poorly in a tough labor market like we do,” said Poreda of Sage Advisory. “A bright person cannot realize his vision without a lot of really smart people.”
With these issues and risks, Musk spends his time buying Twitter, but he seems to be rethinking the deal lately. With the move into social media, some investors are wondering why their bosses spend so much time writing messages on Twitter while the world is on fire.
“It feels like an airplane pilot is watching a Netflix show while experiencing a massive thunderstorm,” said Ives of Wedbush.