Tesla shares have fallen over the past year, in part because investors fear CEO Elon Musk may be too distracted by his Twitter takeover.
Jim Watson/AFP via Getty Images
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Jim Watson/AFP via Getty Images
Tesla shares have fallen over the past year, in part because investors fear CEO Elon Musk may be too distracted by his Twitter takeover.
Jim Watson/AFP via Getty Images
For several years, the meteoric rise of Tesla stock has captivated, excited and mystified Wall Street. But in 2022, this meteor died out.
The electric carmaker’s stock lost 65% of its value in 2022. And the company started the new year with another dip, dropping 12% in a single day after reporting disappointing sales figures.
It’s not just bad for investors. It’s also bad for Tesla CEO Elon Musk, who has much of his wealth tied to the automaker and is no longer the richest man in the world.
But what made these sales figures so disappointing? Tesla set new sales records; it increased deliveries by 40%. The company continues to dominate the rapidly growing electric vehicle market in the United States as the world seeks to reduce carbon emissions that cause climate change.
Here are four reasons why the actions of the transformational company have been cratered.
It was a difficult year for the entire automotive industry
It’s not just Tesla that has seen stock values plummet. The stock market as a whole has fallen in 2022, and within the auto sector, every automaker has seen stock prices fall. Major players like General Motors and Ford fell around 40%, and startups like Rivian and Lucid fell more than 80%.
All automakers have faced the same headwinds as the economy as a whole (inflation, rising interest rates).
They also started 2022 with parts shortages that kept dealer lots exceptionally empty — and ended the year with exorbitant vehicle prices which could be refused to potential buyers.
U.S. auto sales fell in 2022 to their lowest level in a decade, according to Cox Automotive estimates.
And Tesla’s sales may have risen 40% from 2021, but it still fell short of its lofty growth targets and analysts’ expectations.
Tesla faces new competition for electric vehicle sales
Despite a difficult year for the entire automotive industry, sales of electric vehicles increased last year. And Tesla continues to dominate the electric vehicle market.
The bad news for Tesla? The competition is rising. At the high end of the market, household names such as Mercedes-Benz, BMW and Audi, as well as Lucid, Rivian and Polestar, are beginning to enter the territory of Tesla’s more expensive models.
“We have a bunch of cars that compete on par with Tesla in that they’re performance-oriented, they’re luxurious,” says Autotrader editor Brian Moody.
Brand new Tesla cars sit in a parking lot at the Tesla factory in Fremont, California in October. Tesla stock has lost 65% of its value in 2022.
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Brand new Tesla cars sit in a parking lot at the Tesla factory in Fremont, California in October. Tesla stock has lost 65% of its value in 2022.
Justin Sullivan/Getty Images
Meanwhile, vehicles like the Kia EV6, Ford Mach-E and redesigned Chevy Bolt are starting to eat into the mass EV market. There is also growing competition in China, a critical market for Tesla and other automakers.
Tesla still accounts for 65% of electric vehicle sales in the United States, according to S&P Global Mobility. But the percentage drops, which the stock market doesn’t like.
Elon Musk’s takeover of Twitter is a headache for Tesla
Musk ran multiple businesses for years. But his purchase of Twitter last year is not like his management of, say, SpaceX.
The aura around Musk – for his fans, a genius and a visionary – is part of the reason so many people want a Tesla. Now Musk has essentially become a professional Twitter troll, posting provocations and happily embracing certain right-wing positions from his mighty perch atop the social media giant.
A survey by Morning Consult It was found that between October and November 2022, Tesla’s net preference dropped by 20 percentage points among Democrats and increased by 4 points among Republicans. This could affect sales, as liberal voters tend to want to buy electric vehicles.
Musk also had to sell billions of dollars of Tesla stock to fund his takeover of Twitter, hurting the stock. Musk has seen his personal wealth drop sharply, despite still having over $100 billion.
Meanwhile, to the dismay of some of his staunchest supporters, his time on Twitter cuts into the time Musk has for Tesla.
Many Tesla investors are agitating for Musk to appoint a new Twitter CEO, as he claimed he wouldand take a step back from the social media company.
“It’s a moment of truth for Musk to navigate damage control now,” wrote analyst Daniel Ives, a longtime Tesla fan who criticized Musk’s handling of the Twitter buy, ” or the brutal pain will continue”.
Turns out Tesla is a car company
Another possible explanation for the fall in Tesla stock: its price was simply too high to begin with and is now trading at more realistic levels.
For a time, Tesla traded as a high-flying tech stock, rather than a goods maker.
Musk himself encouraged this, calling Tesla a “software company”. The word “stratospheric” got thrown around a lot because the stock price soared so high it couldn’t be justified based on Tesla’s revenue or production numbers.
Now prices have fallen closer to earth, for Tesla as well as the tech companies it looked like on Wall Street.
So as a stock, Tesla has had a terrible year. But as a company that makes cars – physical things that people buy and drive – Tesla managed to sell 1.3 million of them in 2022.
This is impressive, especially considering the supply chain difficulties that have plagued the entire industry.
Looking ahead, even with more competition, there’s plenty of room for Tesla to continue to grow.
“Their volumes are going to increase further and they are going to make further money,” predicts Stephanie Brinley of S&P Global Mobility.
And of note: Even after losing a staggering $700 billion in value, Tesla is still the most valuable automaker in the world.
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