Tesla Shares Plunge 12% As Company Warns Of Slow Electric Car Sales
By Chris Isidore, CNN Business
Tesla shares suffered a major hit on Thursday, dropping as much as 12% after the market opened. This huge decline resulted in the loss of $80 billion off the company’s market value. The stock closed at its lowest level since December 2022, marking the worst day for Tesla in 21 months. Since the beginning of 2024, Tesla’s market capitalization has plummeted by $210 billion. The company attributed this steep drop to the warning it issued about slowing growth in electric car sales and the threat of competition from Chinese auto companies.
On Wednesday’s earnings call, the automaker revealed that its sales growth this year “may be noticeably lower” than last year, primarily as it works on developing the “next-generation” vehicle, likely a smaller model with a lower price. Although Tesla reported a 38% increase in deliveries from last year, it missed the 50% annual growth rate that was previously set. Furthermore, Tesla’s financial results for the latest quarter were disappointing, as adjusted earnings per share fell 40% from a year ago, and revenue, which rose 3%, fell short of forecasts.
This was the second consecutive quarter of poor performance from Tesla, breaking a streak of better-than-expected results dating back to early 2021. Despite doubling over the course of 2023, the stock is currently trading at its lowest level since April of last year, having fallen 16% ahead of Wednesday’s earnings report.
Tesla also faces competition from Chinese automakers, with China’s BYD selling more cars than Tesla in the final three months of last year. Additionally, increasing competition from BYD and other Chinese automakers has led to an investigation by European officials, which could result in higher tariffs being imposed on car imports from China.
Despite these challenges, there is hope on the horizon for Tesla. Some analysts believe that the upcoming launch of its lower-cost vehicle will be the catalyst that the stock needs. Furthermore, the broader economic environment is expected to start tilting in Tesla’s favor, particularly as interest rates are anticipated to fall. This could improve market conditions for the automotive sector in general, and Tesla specifically.
Although Tesla’s recent performance has been poor, many observers believe that the company has the potential to rebound, especially with the unveiling of a new, more affordable vehicle and improvements in the economic environment. The future remains uncertain, but for now, Tesla is facing headwinds that have resulted in significant losses and challenges for its future growth prospects.