Despite its record, why is Tesla under attack from all sides?
2022 was, in a way, the year of Elon Musk. But While his $44 billion takeover of Twitter in late October made headlines for the success of SpaceX’s astronaut launches and Tesla’s soaring sales, the flamboyant and temperamental boss has faced many disappointments. Thus, Tesla lost two-thirds of its stock market value in 2022, a victim of challenges related to demand for electric cars, the end of easy money on Wall Street, but also the uncertain outcome of the social network.
On the one hand, the multibillionaire sold another 3.6 billion in early December to finance the purchase of his new toy and later several billion dollars worth of Tesla shares. And that said, he doesn’t intend to sell more in the spring yet. Elon Musk also made the social network confused by cutting half of the employees. Suddenly, “Musk has lost all credibility with the investment community,” said Wedbush Securities analyst Dan Ives. Ahead of Oppenheimer’s Colin Rusch, it’s “impossible” to value Tesla without considering Twitter’s volatile management.
Read alsoElon Musk’s bankers are biting their fingers after taking over Twitter
Unusual promotions
Elon Musk, who has long been at the top of the ranking of the largest fortunes, suddenly left the first place in favor of the Frenchman Bernard Arnault, the head of LVMH. According to the Bloomberg Billionaires Index, Elon Musk has lost half of his fortune since January 2022 and still maintains a tidy sum of $130 billion. This evaporation is mainly due to the falling value of Tesla. However, it has increased twelvefold in two years (2020 and 2021), crossing the $1,000 billion mark.
However, Tesla, which has de facto promoted Tom Zhu to No. 2 behind Elon Musk in China, announced earlier in the week that it will deliver 1.31 million high-end electric vehicles in 2022. That’s an enviable 40% increase. . The problem is that the Fremont brand remains below its forecasts (+50%) and Wall Street expectations. At the end of the year, Tesla even had to offer unusual promotions to boost sales. In an email sent to employees and consulted by CNBC, Elon Musk asked them to volunteer to deliver as many cars as possible by the end of 2022.
Observers are worried about the slowdown in sales growth. According to Morgan Stanley analyst Adam Jonas, demand for electric vehicles has outpaced supply for the past two years, but this trend should “reverse” in 2023. “Between a deteriorating macroeconomic environment, unaffordable prices for many, and increased competition, there are hurdles to overcome. “There’s no doubt there are demand fears,” said Thomas Hayes, chairman of Great Hill Capital.
very expensive cars
The brand no longer has a virtual monopoly on electrics in the US. General Motors, Ford, Nissan, Korea’s Hyundai-Kia, Volkswagen group entered it. Moreover, Mercedes-Benz, BMW, Audi (Volkswagen), Polestar (Volvo) give it tough competition at the top. Tesla still dominates the US electric market with 65% market share (first nine months of 2022), but in 2020 it was 80%! S&P Global predicts that its penetration will fall below 20% in 2025. By this time, the American electricity pie will, of course, have grown considerably.
Several observers fear that the expensive (from €53,490 to €130,000 each in France) Tesla will face competition from cheaper electric models. Didier Leroy, then-Toyota’s vice president, predicted two years ago, “The big manufacturers will come into force at a lower price in the same niche. And there it will be difficult for Tesla.”
Worse: A Reuters survey shows that used Tesla transaction prices are falling faster than those of other manufacturers, which will weigh on demand for new models.
Opening of the German factory
Tesla’s dynamism is nevertheless astonishing. Last year, it was the largest growing producer in the world. The Californian firm even recorded a 48% increase in sales in the United States last year. Another broken record: the Tesla factory in Shanghai delivered 710,000 cars in 2022 (+48%). In 2020, Tesla passed the historic milestone of 500,000 cars sold worldwide for the first time, and a year later approached one million.
After losing $4.5 billion between 2016 and 2019, the “high-tech” firm finally managed to turn a net profit in 2020. After the Shanghai location, Tesla opened a German factory in Grünheide, near Berlin, last March. We haven’t opened a new car plant in Western Europe since Toyota’s French site in Valenciennes in 2001!
At $339 billion, Tesla’s market capitalization remains the number one in the automotive world, even in a sharp decline, and still is. It is ahead of Toyota (210 billion euros), Volkswagen (74), Mercedes (70.5), BMW (58.5), GM and Ford ($49 billion each), Stellantis (45 billion euros). The price of Tesla is thirty times higher than that of Renault.
