Tesla’s market value evaporated by nearly 100 billion U.S. dollars, its worst performance at the beginning of the year

Tesla had a great year in 2023, doubling its share price and becoming the eighth best-performing stock in the world. However, by the beginning of 2024, the electric vehicle giant suffered the worst start in history, with its market value evaporating by more than US$94 billion (approximately 674.92 billion yuan) in just two weeks.

Multiple negative news followed, hitting Tesla’s stock price hard: Car rental giant Hertz turned to buying traditional fuel vehicles , Tesla cut prices again in China, rising labor costs, and slowing demand for electric vehicles in the United States, all intensified investors' concerns about Tesla's growth. Cowen analyst Jeffrey Osborne said: "Investors' main concern about Tesla is stagnant growth, and Tesla's price cuts in China have exacerbated this concern. Fierce market competition has made the electric vehicle industry seem to be trapped in a price war. .”

Tesla’s market value has shrunk at the beginning of this year, the largest amount since it went public in 2010. On a percentage basis, Tesla shares are down 12% since early January, their worst start since 2016, when shares fell 14% in nine trading days at the start of the year.

What’s worse is that Tesla’s chances of turning things around anytime soon seem slim.

Tesla has been aggressively cutting prices since early 2023 to boost demand, but the result is that profit margins continue to be eroded. Tesla's third-quarter auto gross margin, excluding regulatory credits, plummeted to 16.3% from 27.9% a year earlier. That pressure will only intensify as U.S. factory workers get raises. Ivana Delevska, chief investment officer at Spear Invest, said: "We are experiencing a cyclical downturn in electric vehicles, but competition has exacerbated this cyclical pressure. Price cuts and plummeting profits are both the result of these adverse competitive conditions."

Because Western military operations have led to tensions in the Red Sea, forcing Tesla to reroute goods to its Berlin factory. To this end, they plan to suspend most production at the factory near Berlin from January 29 to February 11. This undoubtedly brings greater trouble to Tesla.

Tesla first warned of slowing demand for electric vehicles in its third-quarter earnings report in October. At the same time, automakers and suppliers around the world have also lowered their forecasts, with many automakers Expansion plans have also been scaled back.

Tesla reported fourth-quarter delivery data that beat analysts’ expectations. However, Tesla still lags behind in global electric vehicle sales compared to China's BYD.

Tesla investors were surprised by the latest results. Tesla's stock performance ranked eighth in the S&P 500 last year, but so far this year, it is the eighth-worst performer. This is also a huge blow to Tesla CEO Elon Musk. The world's richest man has seen his net worth fall by $23 billion this year, while Amazon CEO Jeff Bezos's is rapidly catching up. As of Friday's close, Bezos's net worth was $179 billion, while Musk's was $206 billion. Musk's net worth mainly comes from his Tesla shares and approximately 304 million vested shares. In addition, he also owns about 42% of SpaceX, which is estimated to be worth $53 billion according to the Bloomberg Billionaires List.

Despite the challenges, Tesla remains a key force in the global electric vehicle transformation. The reason is that it's still far ahead of potential competitors. Although BYD has surpassed Tesla in sales, it still lags behind in terms of revenue and profits and has not entered the U.S. market, while Tesla remains the U.S. electric vehicle market leader.

In some ways, Tesla's biggest problem may be its past success and the expectations it has generated. As investors piled in, Tesla's market value swelled to the size of all other car companies in the world combined, but its high stock price also made it extremely sensitive to any negative news.

Therefore, many Tesla supporters believe that it should not be compared to ordinary car companies. To them, Tesla's real value lies in the future and the company's hopes of developing the first truly self-driving car. The only problem is, Tesla has been promising it for years, and most experts say the technology may still be years, if not decades, away.

Spear's Delevska said: "Tesla has failed to deliver on the promises of full autonomy and artificial intelligence that were already included in the valuation. For a company with a market capitalization of $750 billion, just becoming Another automaker is not enough."

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