Tesla and Its Horrible Years
Even though Tesla works in a volatile economy, a young industry that is prone to volatility, and in the middle of a geopolitical balancing act that affects all of the above, its stock has dropped dramatically over the past year.
The American electric car firm went from being worth $1 trillion by the end of 2021 to $383.76 billion at the start of 2023. The share price has dropped 69% in the past year.
That dip made Tesla CEO Elon Musk the first person ever to lose $200 billion (£165 billion), the greatest wealth loss in history. It’s also a challenge to the leadership position of the first automaker to market mass-market electric automobiles.
Is there a reason for Tesla’s stock price to have dropped so drastically?
And is it possible for the one-time Wall Street favorite to regain his status? The obsession that sent Tesla on his downward spiral Musk had been an avid Twitter user for many years before attempting to acquire the company. Since joining Twitter in 2009, Musk has sent out over 22,000 tweets, discussing everything from his personal life to the latest developments at his companies to alt-right memes to Twitter itself.
While many people were willing to merely consume Twitter, Musk sought instead to influence and change the platform. A filing with the Securities and Exchange Commission made at the beginning of April revealed that Musk owned 9 percent of Twitter. He declared his intention to acquire the business not long after.
The day his Twitter investment was made public was also the day Tesla shares began a steady slide. Shares of Tesla were selling for about $360 at the time. The price had decreased to $219 by the time he decided to buy the company in October. When Tesla’s price sank to $150 in December 2022, concerned long-term investors began speaking out.
Musk and his questionable choices in business during the Arrival
Not only had Musk made a number of dubious business decisions during his first several months at the social network, but he had also joined Twitter, which was a major distraction.
In his first month as CEO, Musk promoted and interacted with far-right content himself. He also launched a premium service that made it easy for people to impersonate public figures and companies, and he was in charge of firing a huge number of people who were in charge of moderating content.
Half of Twitter’s top advertisers pulled their budgets as a result of the sudden changes. They damaged not only Twitter but also Tesla, which has greatly benefited from investors’ faith in Musk’s commercial ability. Successive polls show that Tesla’s reputation as a brand has taken serious damage.
Investors in Tesla began to make their opinions known.
Gary Black, the managing partner of the Future Fund LLC, which holds Tesla stock worth around $50 million as of this writing in December, tweeted, “There is no TSLA CEO today.”
The Twitter dispute has had a detrimental influence on the TSLA brand, according to today’s market vote. As a result of the Twitter dispute, “Tesla’s brand equity is suffering at a time when EV buyers were proud to drive their Teslas to friends and show off Teslas in their driveways,” he said.
The word “distraction” appears frequently in discussions about Tesla’s demise among industry experts. Columbia Business School adjunct professor and former Tesla stockholder and auto industry consultant Len Sherman blames the company’s “totally incompetent” board for letting Musk go amok.
“The fact that they didn’t actually read the riot act when he started becoming involved with Twitter is just not responsible board governance,” he said to The Independent over the phone from his Tesla. From Tesla’s perspective, what he’s been doing has been incredibly damaging to Tesla’s shareholder value, and the board should be concerned about that. His board isn’t like the others. Not the other way around; Elon Musk is at the board’s disposal.
Musk as the Owner Of Bulk Agencies
The primary cause of the alarm is the apparent inability to pay attention. Musk was already in a tight spot before he started flirting with Twitter. He oversaw operations at Tesla, SpaceX, Neuralink, and the Boring Company. “It’s possible that the Twitter issue is due to an overloaded system,” he speculated.
Sherman acknowledged Musk’s “astonishing” management of Tesla to make it the largest automaker in the world today, but he questioned Musk’s long-term vision. The Cybertruck, a futuristic-looking vehicle with “greater performance than a sports car,” and the second-generation Roadster, which claims to be one of the quickest and most expensive automobiles on the market, are the two new Tesla vehicles now dominating Musk’s attention.
Sherman mentioned that Tesla’s original goal was to “accelerate the advent of sustainable transport by bringing appealing mass-market electric automobiles to market as quickly as feasible,” as stated on the company’s website.
Sherman said that neither existing project even remotely resembles the “mass market car” that Musk had promised. Musk, though, has Tesla making cars that are “interesting from an engineering standpoint,” but which do little to advance Tesla’s future or fulfill the company’s original objective.
He explained that Musk was interested in the challenge because “he wants to prove to the world that he could do something that no one else thought was feasible.” As far as I know, Tesla’s plans to make its electric cars affordable to the masses have been scrapped. He’s moved on from discussing a cheap, mass-market automobile. The Tesla product roadmap appears to be more focused on feeding Elon Musk’s ego and engineering desires than on benefiting customers, investors, or the environment. The Independent’s request for comment from Tesla was not met.
Huge Snags in China
The decline in Tesla’s stock price is due to a number of factors, not the least of which is Elon Musk’s preoccupation with the social media platform. Electric vehicle manufacturers, and Tesla in particular, are up against industry headwinds.
For a long time, Tesla was the only game in town when it came to buying an electric car in the United States or China. About 40% of Tesla’s sales come from the Chinese market, making the country strategically important to the company’s long-term goals. Competition has expanded significantly in both markets.
S&P Global estimates that Tesla’s market share for new electric light vehicle registrations in the United States will fall from 79 percent in 2020 to 65 percent through September 2022. Last week, the company’s stock dropped 13% after it reported lower-than-expected sales, making it the worst week in the market in the last two years.
After lowering the prices of its automobiles in the United States for the second time in three months, Tesla replied by doing the same in China
Dan Ives, a tech analyst at Wedbush Securities, commented on the decline in demand by telling CNN, “The Cinderella ride is over for Tesla.”
The challenges that Musk is having in China have nothing to do with demand. Having bought a social media behemoth, he now has to contend with the political fallout that affects every aspect of his business.
Strategy Risks CEO and founder Isaac Stone Fish told The Independent that regulators may take notice of Tesla because of a major conflict at the core of the company’s worldwide business model.
Both Elon Musk’s standing in the United States and China hinges on his ties to the Chinese Communist Party, and these two factors are currently trending in opposite directions. Musk’s success in China is proportional to his proximity to the Chinese Communist Party, while Musk’s success in the United States is inversely proportional to Musk’s proximity to the Chinese Communist Party. For example, “I think when you develop enemies in Congress, as Musk has, and you are so exposed to the Chinese Communist Party, like Musk is, you are opening vulnerabilities for someone on Congress or a committee to take advantage of that.”
Furthermore, Stone Fish noted that the Chinese government may be aiming to eliminate some of the privileges it has given to Tesla in order to encourage its own electric vehicle industry.
The stock price of Tesla has dropped so much more than that of any other automaker.
A foreign company is allowed to succeed in China while domestic rivals are free to take its technology and use it to compete. This is a famous Chinese tale. When they decide they no longer need the foreign brand, they start phasing it out. “This might be the start of that process for Tesla,” he added of the electric car maker’s current predicament in China.
Sherman, an expert in the automotive sector, speculates that there may be another explanation for why Tesla’s stock has dropped so much more dramatically than that of other automakers. Investors’ perception of Tesla, which is part of the broader technology industry, has been shaken by this newfound reality.
First, I wonder how it got to be so high, and only then do I wonder why it fell so far. His belief in Musk’s talents, he said, contributed to “irrational optimism” that pushed the stock price to $400 in the past.
Sherman continues by noting that rising borrowing rates have “forced firms to justify the valuations they’ve allocated,” resulting in a “reckoning” throughout the technology industry.
Sherman has stated that he still thinks Tesla can win back its crown. Musk needs to be restrained from indulging his many whims, including his desire to create technological wonders and engage in online feuds. He then noted that this could potentially cause issues.
If you can find someone who believes that they can convince Elon Musk to do anything, he said, “I would challenge you to find that person.”