Tesla’s Stock Plummets as Electric Car Maker Faces Setbacks in 2024
After a spectacular 2023 that saw Tesla’s shares more than double, the electric vehicle company has faced a difficult start to 2024. In just the first two weeks of the year, Tesla has lost over $94 billion in market valuation, marking the worst start to a year the company has seen since going public in 2010.
Several factors have contributed to Tesla’s rough start to the year. The company is facing competition from rental car giant Hertz Global Holdings in the electric vehicle market, has implemented price cuts for its Chinese-made cars, and is dealing with signs of rising labor costs. Additionally, there is a broader context of slowing growth in demand for electric cars, particularly in the United States.
According to Cowen analyst Jeffrey Osborne, investors are concerned about Tesla’s stagnating growth, and the price cuts in China only fuel those concerns. The intense competition in the electric vehicle market is leading to a “race to the bottom” for the industry.
Tesla’s automotive gross margin has steadily eroded due to price cuts, falling to 16.3% from 27.9% a year ago in the third quarter. The company’s market cap hit is the largest it has experienced in a comparable period since its IPO, and the 12% drop in shares since the beginning of January marks its worst performance since 2016.
Compounding its troubles, Tesla has suspended most production at its plant near Berlin due to security concerns and has had to divert shipments destined for the same plant.
Although Tesla delivered better-than-expected fourth-quarter numbers, it was outperformed by China’s BYD Co. in global electric car sales, signaling a slowdown in demand for electric vehicles. Consequently, the electric vehicle maker’s stock has fallen from being the eighth-best performer in the S&P 500 last year to the eighth-worst so far this year.
Tesla’s CEO Elon Musk, who saw his net worth increase more than anyone else’s in 2023, has lost $23 billion of that wealth this year. Despite these challenges, Tesla, with its market capitalization of $750 billion, still sits at the forefront of the electric vehicle transition, making it a major player in the industry’s future, according to some experts.
However, its defenders also acknowledge Tesla’s shortcomings, including its failure to deliver on promises of fully autonomous driving and artificial intelligence, calling into question the company’s $750 billion valuation. With the electric vehicle industry becoming increasingly competitive, Tesla’s future remains uncertain.