Despite its records, why Tesla is attacked from all sides
2022 is, in a way, the year of Elon Musk. But if he made headlines for his acquisition of Twitter for 44 billion dollars at the end of October, the success of SpaceX’s astronautical launchers and the boom in Tesla sales, the brilliant and temperamental boss suffered many disappointments. So Tesla has lost two-thirds of its stock market value by 2022, a victim of fears over demand for electric cars, the end of easy money on Wall Street, but also difficulties in uncertain outcome of the social network.
On the one hand, the multi-billionaire sold several billion dollars of Tesla shares to finance the acquisition and then the operating costs of his new toy, selling another 3.6 billion in early December. And this, while he said in the spring that he had no intention of selling any more. Elon Musk also brought the social network into turmoil, firing half of its employees. Suddenly, “Musk has lost all credibility in the investment community,” said Dan Ives, analyst at Wedbush Securities. It has become “unreliable” to evaluate Tesla without considering Twitter’s erratic management, outbids Colin Rusch, of Oppenheimer.
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Unusual promotions
Long at the top of the ranking of the greatest fortune, Elon Musk suddenly abandoned the first place in favor of the French Bernard Arnault, boss of LVMH. According to the Bloomberg Billionaires Index, Elon Musk has lost half of his wealth since January 2022, still maintaining a tidy sum of 130 billion dollars. This evaporation was largely due to the fall in Tesla’s valuation. However, it is multiplied by twelve in two years (2020 and 2021), breaking the ceiling of 1,000 billion dollars.
However, Tesla, which has de facto promoted its China boss Tom Zhu as number 2 behind Elon Musk, announced at the beginning of the week the delivery of 1.31 million high-end electric vehicles in 2022. That is an enviable increase of 40 %. The problem is that the Fremont brand remains below its own forecasts (+50%) and Wall Street expectations. To boost its year-end sales, Tesla even had to offer unusual promotions. In an email sent to employees – and consulted by the CNBC channel – Elon Musk asked them to volunteer to deliver as many cars as possible before the end of 2022.
Observers are concerned about a slowdown in sales growth. In the past two years, demand has exceeded supply for electric vehicles, but this trend should “reverse” by 2023, according to Adam Jonas, an analyst for Morgan Stanley. “Between the deteriorating macroeconomic environment, unaffordable prices for many and growing competition, there are obstacles to overcome,” he said. “There’s no question there are fears of demand,” said Thomas Hayes, chairman of Great Hill Capital.
very expensive cars
The brand no longer has a virtual monopoly on electrics in the United States. General Motors, Ford, Nissan, the Korean Hyundai-Kia, the Volkswagen group entered it. And, at the top of the range, Mercedes-Benz, BMW, Audi (Volkswagen), Polestar (Volvo), give it tough competition. Most Teslas still dominate the electric market in the United States with 65% of the market share (first nine months of 2022), but it will be 80% in 2020! Its penetration should return to less than 20% by 2025, predicts S&P Global. At this time, the American electric cake will, indeed, grow significantly.
Some observers fear that Tesla, which is expensive (from 53,490 euros each in France to 130,000), will suffer in the competition of cheaper electric models. “Big manufacturers will come in force in the same niche for less. And there, it will be difficult for Tesla”, expected two years ago Didier Leroy, then vice-president of Toyota.
Worse: a Reuters survey shows that used transaction prices at Tesla are falling faster than other manufacturers, which will also weigh on demand for new models.
German factory opening
Tesla’s dynamism is nevertheless impressive. It was the world’s largest manufacturer last year. The California company even posted a 48% increase in sales in the United States last year. Another broken record: the Tesla factory in Shanghai delivered 710,000 vehicles in 2022 (+48% too). In 2020, Tesla passed the milestone of 500,000 cars sold worldwide for the first time, approaching one million a year.
After losing a whopping $4.5 billion between 2016 and 2019, the “high tech” company managed in 2020 to finally generate net income. After the Shanghai site, Tesla inaugurated the German factory in Grünheide, near Berlin, in March. We haven’t opened a new car factory in Western Europe since Toyota’s French site in Valenciennes in… 2001!
At 339 billion dollars, Tesla’s market capitalization, even with the sharp decline, remains first in the automotive world, and for now. It is ahead of Toyota (210 billion euros), Volkswagen (74), Mercedes (70.5), BMW (58.5), GM and Ford (49 billion dollars each), Stellantis (45 billion euros). Tesla’s valuation is thirty times higher than Renault’s.
