Tesla in trouble. Shares down 41% year-to-date

In the rapidly developing automotive environment, the revolutionary electric car manufacturer Tesla has recently encountered a number of problems that are causing controversy and concerns of interested parties. From disappointing quarterly results to a solid turnaround, along with increasing competition and evolving market dynamics, the company finds itself in a critical situation.

The dream of workplaces

In mid-April, Tesla (TSLA) employees received an e-mail from CEO Elon Musk informing them of the employee’s dream sweat, referring to the need to cut revenue and increase productivity in the company’s continued growth. This would be about less than ten percent of the number of employees, which represents about 14,000 female workers. It is a global measure, I hope that it will especially affect their main markets – the USA and the United States. It is about the aunt and the first link in the family. In 2019, the number of employees will increase by seven percent and in 2022 by 3.5 percent. Several sources of the Reuters agency from both countries said that the transfer had begun, the fifth being salesmen and technicians. At first, the German Tesla factory blamed the locals for laying off about 3,000 employees, but according to the Reuters agency, in order to implement Musk’s demands, only about 300 employees will be laid off. In addition to regular employees, Tesla’s Vice President of Engineering Andrew Baglin and Vice President of Public Policy Rohan Patel also departed.

The opposite is true

The announcement of the dream sweat of the employees usually leads to a sharp increase in the stock in the whole improved and more efficient operation and especially the profit of the company. In the case of Tesla, it was the opposite, and according to CNBC, the shares lost 6% on the day of the announcement (April 15, 2024) and another 2.7% the following day. For comparison, during the previous waves, shares gained 3 percent in 2019, and although they fell in 2022, they eventually recovered*.

The first decline in perhaps the last 4 years

The current drop was preceded by a drop in value from the beginning of April to the announcement of demand for the first quarter of 2024, when it fell for the first time in 4 years. Unpleasantly surprised investors sold their shares, their value fell by 5.5%.* The sales report for the first quarter reached just under 387,000 sold cars, which represents a 20 percent decrease compared to the last quarter of last year and a year-on-year decrease of 8.5%. The fact that Tesla did not even reach the values ​​predicted by analysts contributed to the unsatisfactory results. Estimates were around 414,000 cars sold. The manufacturer attributed it to the Hussite flows in the Red Sea, compared to the German factory and the production of the Model 3.

Both in April, the declines only contributed to such a drastic decline that the company currently closed. The manufacturer’s shares have been in the red since the beginning of the year. They plunged 41% to $144 per share on April 24. Therefore, do not reach the minimum from the meeting of 2023, when they were equal to 113 dollars per share. Thorn’s capitalization fell to $460 billion, according to Coinmarketcap.com. It reached its maximum at the end of November 2021, when its value reached 1.2 trillion dollars*.

Development of the company Tesla over the last 5 years. (Source: GoogleFinance)*

on, expensive products and weakening demand

In addition to narrow needs and transitions, there are also other reasons that have an impact on the development of the company’s share price. This is a combination of weakening demand, high prices and increased competition from domestic manufacturers. Compared to their American and European competitors, these manufacturers have an advantage in the form of high structural subsidies in the area of ​​durability and technological knowledge, and therefore they can offer consumers easier to use and therefore cheaper vehicle variants. The largest manufacturer and competitor on the Russian market is currently the manufacturer BYD, which according to CNN offers its models for 10 and 16 thousand USD, compared to Tesla, which after the dream price still offers some models for more than double the price.

The competition is not far behind

A car from newcomers on the car market was launched. For example, the company Huawei, which we know as two with a different product line, recently presented its first car, which looks like a sports car from Porsche and is powerful and, of course, cheaper than the Model 3 from Tesla. The prices of available electric cars will then be revealed in sales. BYD or other companies such as XPeng, Li Auto or Nio reported monthly and quarterly sales this year. Any promise that a cheap version of the car could be made quickly dissipated. At the beginning of April, the Reuters agency reported that long-awaited orders for the Model 2 SUV with a price below $30,000 had been cancelled. Instead, Elon Musk announced that he is focusing on the introduction of an autonomous car, the so-called robotaxi, which should be at the beginning of August. Although the announcement caused the stock to rise by 5%*, it surprised investors and customers who expected the Model 2 to be Tesla’s gateway to mass production.

On a positive wave

Despite the aftershocks in the electric car market, Morgan Stanley is optimistic about Tesla’s future. He highlights the potential of the manufacturer from artificial intelligence and recommends that the main activity in the field of electric cars should be prioritized along with the development of artificial intelligence. Petrvvajc’s low demand for bags, according to Morgan Stanley, requires external efficiency and rights, which could lead to non-traditional partnerships. For example, cooperation with human partners could break the company’s reach.

Olivia Lacenov, chief analyst at Wonderinterest Trading Ltd.

* Past performance is not a guarantee of future consequences.