Elon Musk’s Tesla is in decline: From pioneer to old man, 3 years without launching a new model, angry investors, frustrated customers

A year ago, Elon Musk’s Tesla stock soared like never before. The champion company in the electric car industry has had a time when it reached a peak capitalization of over $1.2 trillion.

Today, Tesla is facing issues that have reduced its capitalization, eroded Musk’s fortune and shaken confidence in the company that is central to his business empire. If before, Tesla was prized by investors for looking like one of the fast-growing tech giants, now it looks more like a… car company.

Competitors have gradually cut Tesla’s market share with new electric models that in some ways outperform Tesla. The last time the company brought a new passenger vehicle to market was almost three years ago, which is quite a distance by Detroit standards. That has given buyers new options at a time when some have grown disgusted with the Tesla brand, in part due to Musk’s tumultuous takeover of Twitter.

Tesla, once boasting of endless demand for its products, recently employed a new tactic. In the final weeks of 2022, Tesla slashed car prices by as much as $7,500 in the US to entice buyers — but has yet to hit its annual growth target.

This week, Tesla slashed prices across its entire lineup in the US, some models down nearly 20%, positioning buyers to buy a wider range of vehicles to qualify for the federal tax credit.

Worrying about Musk getting distracted with Twitter and adding to the troubles mentioned above is increasing, many Tesla shareholders are angry. In a bad year for stocks, Tesla’s stock price has fallen about 70% from its peak, wiping out about $850 billion in market value. Musk personally has lost more than $200 billion of his fortune on paper. If Tesla’s stock continues to fall, it will further erode the financial foundations of Musk’s business empire.

In fact, some of the darkest clouds have begun to loom over China, the world’s largest auto market and the driver of much of Tesla’s growth over the past three years. Some sources say that by the end of 2022, the company has scaled back certain battery purchase plans for 2023 amid a decrease in demand in this market.

Tesla slashed prices in China for its two most popular models by about 13% after it reported a drop in sales of its Shanghai-built vehicles in December. Its share of the EV market in China. China fell last year as giant BYD, which offers a wider range of models at various price points, gained ground. Tesla’s Shanghai plant is the company’s largest by volume, accounting for more than half of the electric vehicles Tesla delivered last year.

“ Tesla misunderstands what Chinese buyers want,” said Andy An, chief executive officer of the Zeekr electric vehicle brand of Chinese auto giant Geely Holding Group. Tesla’s interior design lacks the premium feel that Chinese consumers are looking for , he said.

Zeekr, a premium brand whose 001 model competes with Tesla’s Model Y, delivered nearly 72,000 vehicles last year, up from about 6,000 in 2021, the year the model was launched. Tesla delivered 1.3 million vehicles globally by 2022.

Musk thinks higher interest rates are hurting demand for both Tesla’s cars and shares. He said he’s still keeping an eye on Tesla, calling the company’s long-term fundamentals “incredibly strong.” Musk also pointed out that Tesla’s advanced driver assistance technology offers a strategic advantage.

Tesla’s U.S. rivals are also aggressively wooing buyers with new models, gaining greater control over supply chains and investing heavily in digital services.

Ford Motor has launched its foray into the EV market with its popular Mustang, providing the company with a stylish alternative to Tesla models that appreciate sleek designs.

Ford also prioritized launching an electric version of the popular F-150 that hit the market last year, giving it an important advantage over Tesla in the electric pickup market. Musk has been talking about Tesla pickups for years, but the company’s Cybertruck isn’t expected to hit the market until the end of the year at the earliest. Rookie Rivian Automotive also beat Tesla in the lucrative pickup truck market with its R1T.

“ I believe the way to do this is not to go after Tesla directly,” said Ford CEO Jim Farley. It’s getting into the segments where we’re really good, like the F-150, or maybe real off-road vehicles or trucks .”

Ford, like many other automakers, is working hard to attract talent. Alan Clarke, who spent nearly a decade at Tesla, moved to Ford in early 2022 to design parts for the company’s upcoming electric vehicle.

“ Hollywood doesn’t make movies about overwhelming winning teams. They make movies about teams that fall behind and then come back with a miracle ,” Mr. Clarke said of his reasons for joining Ford.

In December, when Tesla lowered the price of the vehicle, Ford raised the price of the F-150 Lightning electric pickup for the third time in 2022. The starting price for the new order truck is now 40% higher than the original Lightning price.

Last month, 37% of those likely to buy electric vehicles in the US surveyed by JD Power said they would consider buying Ford, 39% buying Tesla and 44% buying Chevrolet, making General Motors Co. become the most considered brand.

Stellantis NV recently revealed a prototype of an all-electric version of the Charger. Known for producing cars used in drag races. “ The car we brought to market was not a Tesla,” said CEO Tim Kuniskis. It doesn’t look like a Tesla. It won’t drive like a Tesla. It doesn’t look like a Tesla. No one will confuse the two. ”

In the US, Tesla’s share of the electric vehicle market has fallen to about 65% by 2022, from about 72% the previous year, according to estimates from market research firm Motor Intelligence. Ford took second place with 7.6% of the market after launching the F-150 Lightning and an electric version of its Transit van, according to Motor Intelligence data.

Hyundai Motor and its subsidiary Kia Corp also have new electric vehicle launches that have received rave reviews, controlling a combined 7.1% of the US electric vehicle market.

EV startups trying to imitate Tesla have surpassed the company itself in some areas, although some are struggling to ramp up production. Lucid Group, run by a former Tesla executive, offers a luxury sedan that can go 516 miles on a single charge, giving Lucid an edge in an issue that buyers often see as key. key to select a vehicle. Tesla’s Model S, which is also a luxury sedan, has an estimated range of 405 miles.

“ Buying a white Model Y that he sees other people driving is a bit boring,” said Mittermann, software program manager at Eugene. The competitors in that segment are much better than they were many years ago .”

Over the years, early EV efforts have produced humble models like the Nissan Leaf and Chevrolet Bolt to appeal to people’s environmental sensibilities. Musk opted for flashy, luxury cars that also ran on batteries, eventually launching more affordable models with broader appeal.

Investors were initially attracted to that. By the end of 2021, Tesla stock was trading at sky-high levels. Tesla’s hard-won success with their formula sparked the biggest transformation of the American auto industry since the early 20th century, when Henry Ford’s moving assembly line ushered in the automotive era. mass production cars. As of last year, auto companies and their suppliers have committed to spend more than $525 billion globally through 2026 on electricity, according to consulting firm AlixPartners LLP.

Of course, Tesla remains the undisputed global leader in EVs — and the most valuable auto company in the world, even after the recent drop in stock prices. They have an established electric vehicle supply chain that has led for many years in scale of production and an extensive, proprietary charging network.

By the end of 2022, Tesla had cars rolling off the assembly line at an annual rate of about 1.8 million units per year. The company’s projections suggest that it’s likely to be a long time before GM or Ford overtakes that pace of electric vehicle production.

The problem is that as the auto industry begins to follow Tesla’s lead, planning a flurry of new models, Musk’s focus sometimes seems to shift elsewhere. Tesla bought $1.5 billion worth of bitcoin. Musk added “Technoking” to his profile. And, instead of launching a new car, he promised to build a humanoid robot named Optimus.

Tesla has spent years developing an all-electric semi-trailer truck, the first of which was delivered in December, hitting the relatively niche long-haul trucking market.

Meanwhile, as rivals have rolled out new services, Tesla’s current models are starting to show signs of “age”. The company has also repeatedly delayed the launch of Cybertruck. “ The goal is not to be a car company. There are many car companies. You don’t need another auto company, ” Musk said in 2021, reiterating that Tesla’s long-term mission ” is to promote the advent of sustainable energy .”

Musk’s personal wealth has dropped to about $130 billion from more than $330 billion at its peak in late 2021, according to the Bloomberg Billionaires Index. He sold more than $39 billion worth of Tesla stock during that time, in part to finance his $44 billion purchase of Twitter.

Musk’s focus on the social media company in recent months has frustrated some Tesla investors, who say the popular businessman is distracted. Meanwhile, Tesla’s brand image has suffered as Musk’s management style at Twitter and political commentary alienated some potential car buyers.

Bradley Friesen of Vancouver, Canada, put down a deposit for a Cybertruck in December 2019, two weeks after Tesla unveiled the stainless steel angular pickup. Three years later, when the Cybertruck still hasn’t launched and Musk’s comments on Twitter increasingly annoyed Mr. Friesen, he was forced to change his mind. He had pre-ordered an R1T pickup truck from Rivian. The Southern California-based startup has begun delivering trucks in 2021.

” I don’t think I’ve ever owned a Tesla ,” said Friesen, who is expected to receive his R1T in the second half of 2023.

During most of the Covid-19 pandemic, demand for Tesla was always high. Customers face months-long wait times on many models, and Tesla owners have sold their used cars for thousands of dollars more than they paid for the new ones. new car.

The company responded by racing to roll out as many existing models as possible, rather than diversifying its product line. That bet has caused anxiety on Wall Street and challenged the auto industry’s long-held belief that automakers need to offer a wide range of updated models to garner interest. buying.

” Tesla’s fundamental focus this year is on expanding production ,” Musk said in January 2022. “ If we introduce new vehicles, total vehicle production will decrease .”

Tesla fell short of its growth target for 2022. Year-on-year growth in customer deliveries has dropped to 40%, from 87% in 2021. The company said changes to the way Auto manufacturing and distribution patterns have resulted in more vehicles at the end of the year.

Marc Winterhoff, a partner at consulting firm Roland Berger who has advised a number of Tesla’s competitors in the US, said Tesla’s stumbling block has bought time for emerging electric-car rivals. their.

Meanwhile, Tesla has been pushing for expansion efforts. Musk said later that month on Twitter that by December, the location of the new factory was near. People familiar with the matter said the company brought Tom Zhu, its longtime China executive, to the US as it worked to optimize domestic production.

Tesla is profitable at a time when its main US rivals are losing money on every electric vehicle they sell. FactSet data shows the company’s operating profit margin hit 17% in the third quarter, compared with 8.1% for GM and 1.5% for Ford. Rivian and Lucid are unprofitable.

“ If there were more price pressure… Tesla would be better positioned to regulate ,” said Owuraka Koney, chief executive officer of investment management firm Jennison Associates LLC, one of Tesla’s largest shareholders. that direction ”.

“ Even so, Tesla is not the industry benchmark as it once was ,” said An, Zeekr’s chief executive officer.

“Tesla is very good,” he said. “ But other companies are also showing their strengths .”

Source: WSJ