Looking back at Tesla’s 2022: The ‘victim’ suffered the most because of the CEO’s own joke, the ‘king of electric cars’ was shaken

Tesla is on track to become the worst stock of 2022 after a sell-off by veteran investors. In addition, the decline in demand for electric vehicles in the context of the general economy facing recession risks also “clouds” the prospect of electric car companies, which are considered the most valuable in the US, according to the WSJ. .

Previously, in the early 2020s, Tesla was hailed as one of the auto industry’s big winners, a time when the sector was hit hard by chip shortages and global supply chain disruptions. bridge.

In early 2022, Tesla announced fourth-quarter business results of 2021 with revenue and profit that exceeded all analyst expectations. Specifically, in the quarter, the company recorded revenue of $17.72 billion, significantly higher than the average forecast of $16.57 billion according to a survey by Refinitiv, an increase of 65% year-on-year. there.

Thus, for the whole year of 2021, Tesla’s net profit reached $5.5 billion on revenue of nearly $54 billion, significantly higher than 2020. This helps 2021 become a breakthrough milestone for the electric car company.

At that time, Elon Musk almost dominated the US media, then was named “Person of the Year” by Time magazine. The billionaire’s every move is welcomed by the press, from very ordinary tweets to a poll to sell tens of billions of dollars in shares of electric car company Tesla. Every move can cause huge fluctuations in the market, both stocks and cryptocurrencies.

“Person of the Year is an influential person and few individuals are like Elon Musk. In 2021, Musk will not only emerge as the richest person in the world, but perhaps also an example of wealth that is making big changes in society,” CNN quoted editor-in-chief Edward Felsenthal as saying. of Time magazine said.

Despite warnings about supply chain problems, Tesla earlier this year confidently forecasted full-year 2022 sales to grow by 50%. Experts also expect the company to have an optimistic financial report, despite the “headwinds” of the market.

However, that scenario did not materialize. In fact, Tesla has lost about 70% of its value since the stock peaked in November 2021. Economic uncertainty deepens, while consumers have more choices when it comes to buying a new EV. Wall Street worries that Tesla may need to sacrifice profits to maintain growth, after the stock’s decline outweighed the decline of the broader market and many of its rivals.

It all started when Musk announced he wanted to take over the social network Twitter. In a letter to the Board of Directors, he asserted that the platform “will not be able to thrive nor serve the right to free speech if the current model remains.” Therefore, it needs to be transformed into a private company, right under the hands of Elon Musk.

It wouldn’t matter if Musk didn’t use Tesla as a “surrogate” to raise capital for a $44 billion deal. The news that the richest billionaire on the planet was about to complete the transaction and planned to mortgage a large amount of Tesla shares made investors panic at that time. They worry that once he has Twitter in hand, Musk will distract from work at Tesla.

“Musk is taking a risk by using Tesla stock as collateral. The sudden drop in the shares of this electric car maker will cause a lot of discomfort to the market,” said Russ Mold, AJ Bell expert.

As of May 2022, Tesla stock has lost more than 30% of its market capitalization. In the trading session on April 26, this manufacturer’s capitalization also evaporated a record of about $126 billion after the stock’s plunge. Gaining control of the new social network is expected to drain Musk’s time, effort and money, in the context of the global electric vehicle industry in need of a breakthrough.

“The Twitter acquisition has become a negative factor for Tesla stock,” said Wedbush analyst Dan Ives.

According to the WSJ, Tesla stock has lost 60% of its value so far since Musk announced plans to buy the social media platform. The billionaire’s continued use of Tesla shares to raise capital further puts the electric car company in jeopardy because investors still maintain a strong tendency to withdraw money.

Since the end of last year, Musk has sold a total of more than $39 billion in Tesla shares. Thus, the number of shares currently held by Musk, excluding exercisable options, is 424 million shares.

Of course, Tesla stock is also affected by other macro issues, such as the Russia-Ukraine conflict, the move of the Fed, the risk of recession or supply chain chaos; but the Elon Musk-Twitter deal is still the leading influencing factor. According to analyst Dan Ives at Wedbush, Musk’s move is like treating “Tesla as an ATM machine” to raise the newly owned social network into a “super app”.

“The market shows that the Tesla brand has been negatively impacted by Twitter dramas. In the past, people used to show off each other proudly about this company’s electric cars, but now it’s different. Twitter controversies are hurting brand equity,” wrote Gary Black, managing partner at Future Fund, which owns $50 million in Tesla stock.

Meanwhile, Elon Musk himself has denied responsibility and blamed the general context of the economy: “In simple terms, when the interest rate on bank savings with guaranteed capital begins to approach the profits of the stock market, people will convert the shares into cash. As a result, stocks fall.”

According to Bloomberg, for a moment, Musk may have lost his status as the richest billionaire in the world according to the Forbes rankings, but Tesla himself still possesses enviable power. It is still considered the dominant global electric vehicle company, and no other manufacturer is in a better position than Tesla to take advantage of preferential tax credits for battery manufacturing and electric vehicle assembly.

However, the goal of increasing the number of vehicles delivered quickly by 50% a year – an ambition Tesla reached earlier this year – looks like it will have to be compromised. The reason is partly due to the fact that Tesla is having to reduce the selling price of some models even when input costs are high, thereby reducing profit margins. Before that, Musk also hinted a lot about headwinds that are out of control due to the Chinese real estate market and the story of the European energy crisis.

The first trouble of the quarter appeared when the company announced that the number of vehicles in excess of production had reached 22,000 units. The company then hastily changed its marketing strategy in China, in the context of fierce competition from domestic rivals putting the electric car company’s growth plan at risk.

According to experts, Tesla’s previous position as the leader in the EV market is not easy to usurp, especially in the US, where the automaker sold more vehicles throughout 2022. However, one There are some signs that this position is about to decline, as Tesla is “busy” facing a series of problems around the stock’s plunge, Autopilot technology and a gloomy outlook for growth. According to estimates from Cox Automotive, Tesla’s contribution to total new electric vehicle sales in the US fell to 64% in the third quarter from 75% in the same period last year.

The study found that the loyalty of Tesla owners also dropped significantly. Specifically, as of May this year, about 70% of Tesla owners said they would be able to return to buy a second car. This ratio has now dropped to less than 60%, while the rest of the industry hovers around 65% on average. According to HundredX, Tesla’s perception of quality, reliability, service, and brand value all turned negative over the course of several months.

“The future loyalty data is really worrying. This foreshadows a storm coming for Tesla,” said Rob Pace, founder and CEO of HundredX, and said Tesla owners are turning to buying electric cars from promising startups. , such as Lucid or Rivian. The fact that Tesla is often entangled in controversies surrounding Autopilot self-driving technology is believed to be one of the main reasons.

According to NHTSA, at least 18 deaths may be related to self-driving assist technology. The agency said it had investigated nearly 200 accidents, including Tesla. The California Department of Motor Vehicles later accused the company of false advertising, leading customers to believe that Autopilot could safely steer the vehicle on its own.

In response, Tesla insisted that the company understood the limits of the system, that the Autopilot feature “requires active supervision by the driver and they must not leave the vehicle fully autonomous”. Musk believes that using Autopilot correctly will help drivers have safe trips, instead of becoming victims of unwanted collisions.

“Tesla has always defended me. They think it’s people who are bad drivers, not technology,” said Gene Munster, managing partner at Loup Ventures, an investment firm.

In the past, Musk has foreseen a drop in demand for electric vehicles – the fallout from the Chinese real estate downturn and the Europe-wide energy crisis. The controversy surrounding the fatal stabbing scandals also raises big questions about Tesla’s safety as the company is facing a series of lawsuits and tightened supervision by regulators.

“Tesla has not provided specific diagnostic data. All safety checks are performed with the naked eye only. This is a very outdated test method, especially when we know about the patents that Tesla owns,” said Park Sang-hyuk, a South Korean parliamentarian.

According to Bloomberg, China is currently the most competitive EV market, with a host of domestic automakers as strong as BYD. According to the China Vehicle Association, domestic brands accounted for nearly 80% of electric vehicle sales in the first seven months of the year. Part of the motivation comes from the fact that local EV manufacturers are so good at attracting customers. In particular, companies such as BYD or SAIC-GM-Wuling Automobile have launched a variety of low-cost vehicles to serve the segment of customers with tight budgets. This puts Tesla’s position at stake.

To improve, the company last month launched a discount program in China for the first time. This move is said to be extremely rare, especially for a company that once boasted that it did not need traditional advertising campaigns. In addition, Tesla also upgraded the factory in Shanghai to double capacity to about 1 million vehicles per year, and shorten the waiting time to buy cars from 22 weeks at the beginning of the year to 1 week.

Not only having problems in the race to maintain the “throne”, Tesla itself also has its own problems in the electric vehicle battery segment. A series of traditional automakers ramping up production of EVs and worries about the scarcity of lithium are making Tesla no longer the VIP guest of the precious metals market.

Previously, the prospect of a new mine that could provide sufficient energy for a leading American electric car brand was said to be “enough” to convince the most demanding investors. As a potential customer in a market rife with startups, it’s easy for Tesla to negotiate favorable terms, such as a long-term supply agreement with a fixed price.

Things have been rocked since Ford Motor and General Motors struck generous deals with potential suppliers, including pledges upfront or cheap loans. According to Chris Berry, president of House Mountain Partners, a metal battery consultancy, Musk’s lithium market leadership is rapidly evaporating as rivals “put money in guns and blow them up.” into the supply chain”.

Meanwhile, Tesla in October ended months of hopeless negotiations with mine developer Core Lithium. Previously, this brand negotiated in 2020 to acquire Cypress Development – an American project developer but failed to reach an agreement.

“Elon’s star power has reached its limit,” Lowry said. “Tesla may soon be like everyone else”

However, in terms of scale, Tesla still holds the dominant position. Last year, the brand used about 42,000 tons of lithium carbonate, five times more than Ford and GM consumed, according to calculations based on BNEF data.

As such, Tesla’s immediate future looks secure. In a filing in May, the company revealed it had signed agreements with four major companies: Albemarle, Livent (listed in the US), Ganfeng Lithium (China) and Sichuan Yahua Industrial Group.

By: Bloomberg, WSJ, CNBC