The spectacular fall of Tesla

The spectacular fall of Tesla

What caused Tesla’s downfall? What could have caused this spectacular drop in one of the most profitable stocks of 2020 and 2021? Is its founder, Elon Musk, responsible?

Tesla’s plunge

Even though Tesla remains the highest-valued automaker on the planet, it is now just $500 billion in market capitalization, a 65% plunge from its peak on Jan. 3, 2022, when the company was valued at over $1.2 trillion. For now, nothing seems to stop his fall. Tesla was, until six months ago, the exceptional figure in the automotive sector.

Admittedly, the economy is no longer as flourishing and the majority of companies listed on the stock exchange have also suffered in recent months, but that is not enough to explain these difficulties. In order to empty its storage car parks, Tesla lowers its prices. The offers are different depending on the country. An offer remained similar everywhere: 10,000 km of free supercharge for any car delivered before December 31. In addition to this offer, for the first time, Tesla offered a discount of €3,000.

Even the “Model Y Propulsion” launched in Europe at the end of the summer benefited from this reduction. And with €3,000 less on its base rate, it fell below the €47,000 mark, which made it eligible for the maximum ecological bonus of €6,000 in France. This accumulation of discounts is surprising, because until now Tesla has made no concessions on prices. The company would still have tried to make believe in a bug; but customers have actually received a final invoice at this price, defying all competition. This strategy and the drop in sales may betray a deep problem for the manufacturer.

The reasons for such a fall

Because Tesla’s valuation was based on the automaker’s future potential, the company was often referred to as the most overvalued on Wall Street. That’s why, when Tesla’s economic outlook dimmed in 2022, Tesla’s growth potential also dimmed.

We must not forget that even if Tesla is valued today at 500 billion dollars, at the same time, the big three German car manufacturers Volkswagen, Mercedes-Benz and BMW only total 215 billion dollars.

Beyond the global economic context of Tesla, we must take into account the acquisition of Twitter by its CEO: Elon Musk. In order to finance the purchase of Twitter, he has sold shares of Tesla for tens of billions of dollars since the beginning of the year. He is one of the largest shareholders and these massive sales lead to a mechanical drop in the share price. In addition, since his takeover, the image of Elon Musk has been greatly tarnished. Indeed, he fired more than half of the social network’s employees, he publicly attacked Tim Cook, he decided on his own to restore Donald Trump’s account and he even suspended the tracking account. the journeys of his private jet…

Thus, we can worry about the public image of Elon Musk at the level of Twitter and the fall of shares of Tesla.

The future of Tesla

Tesla is due to release its fourth-quarter delivery and production numbers, just after the New Year, and they could be disappointing.

Tesla hopes to go back on the stock market with its new Optimus robot project, which would have enormous potential. Still, some AI and robotics industry insiders scoffed at the first prototype, price, and timeline presented by Elon Musk. Experts felt that Tesla’s presentation did not live up to their expectations, and that the company still had a long way to go before it hoped to be able to market its robot.

Tesla’s stock market plunge was relatively predictable, indeed companies with irrational valuations tend to experience more dramatic drops than average.