Troubled Times for Tesla

What goes up must come down. And while that might not be the case for Elon Musk’s rocket company SpaceX, it’s certainly proving true for Tesla. And, at the moment, the big question is how low things might go for the once high-flying battery-electric-vehicle manufacturer.

Tellingly, Tesla stock hovered at barely $110 a share on Dec. 28, precisely two months after the serial entrepreneur completed his takeover of Twitter. Since he announced his $44 billion bid back in April a full $800 billion in market capitalization has gone up in smoke and the bonfire continues to burn.

The star-crossed acquisition has clearly played a significant role in Tesla’s downturn. It has distracted the micromanaging Musk to the point where “Tesla has no working CEO,” according to the automaker’s third-largest shareholder and long-time Musk “fanboy,” KoGuan Leo. But, if timing is everything, the Twitter fiasco couldn’t have come at a worse time.

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Tesla stock has ridden a roller coaster ever since the now Texas-based automaker went public in 2010. But there are growing concerns that the fundamentals that once made it the world’s most valuable automaker – and Musk the world’s richest man – are turning in the wrong direction. Some of the problems are clearly beyond Tesla’s control. But a disproportionate share appear to be self-inflicted, starting with Musk’s Twitter takeover.

Declaring himself a “free speech absolutist,” the Tesla CEO almost immediately began his tenure by reinstating accounts for former President Donald Trump (pictured, below), along with a variety of anti-vaxxers and Holocaust deniers. At the same time, he took aim at President Joe Biden, a variety of Democrats and liberals, and members of the LGBTQ+ community.

It’s “not a good idea” to attack those who make up a disproportionate share of your customer base, says Sam Abuelsamid, principal auto analyst at Guidehouse Insights – especially at a time when demand for Tesla products appear to be slowing, after years of growth.

Musk Trump Twitter (Getty)

“Divested from all things Elon,” says Rob Wheeler, CEO of the Palm Springs LGBTQ center, in an Instagram post a week before Christmas. He says he has returned his leased Tesla 20 months early and will switch to a competitor’s BEV.

After a strong third quarter, Musk promised an “epic” finish to 2022 during an earnings call with analysts. The automaker’s four Gigafactories, he said, were “running at full speed” in order to meet “excellent demand” for Tesla’s four product lines.

But things haven’t worked out quite as expected. Though sales are growing in Europe, the U.S. is in a slide, forcing Tesla to launch rare incentives – and then double them to $7,500 on the Models 3 and Y. In China, meanwhile, with COVID hammering the economy, Gigafactory Shanghai (pictured, below) will be shuttered for at least a week.

Worldwide, Tesla deliveries for 2022 totaled a record 1.3 million units, up 40% year-over-year, but short of analysts' expectations. And, after staging a modest end-of-year recovery, that sent Tesla stock tumbling again as Wall Street got down to business after the New Year’s break.

And there are growing concerns 2023 will bring even more challenges to Musk’s buoyant view of the future. It doesn’t help that Tesla’s products are becoming dated. Research by TrueCar found a more than 10% decline in “consideration” of its products during Q3, and industry data show the automaker’s share of the EV market fell from 79% to 73% through November.

“The company could feasibly run out of buyers in the $50k+ price range,” tweets long-time Tesla bull Alex Potter, an analyst with Piper Sandler.

Not only has Tesla failed to make any significant product updates since the March 2020 launch of the Model Y (pictured, below), but it has little coming in the retail pipeline. The long-anticipated Cybertruck pickup could be the breakthrough it needs, but the truck is now over a year behind schedule and it’s far from certain Musk can deliver on a promise to put it into production in 2023.

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Meanwhile, the number of competing EVs capable of 200 miles (322 km) or more per charge has jumped from about a dozen a year ago to nearly 50 – with two dozen more set to debut in 2023.

By the time the Cybertruck launches, it could face competition including the Rivian R1T, GMC Hummer EV, Ford F-150 Lightning, Chevrolet Silverado EV and Ram Revolution, among others.

Complicating matters, Tesla faces a variety of potential legal and regulatory issues. It’s being sued for alleged racial discrimination and sexual harassment. Other lawsuits focus on the Autopilot and Full Self-Driving technologies now linked to a number of fatal crashes. And Reuters reported in October that Tesla could face a criminal investigation over its marketing of  semi-autonomous ADAS systems that are labeled as “full self-driving.” One shareholder’s lawsuit would even rescind the lavish pay package Tesla’s board approved for Musk. It’s made it all the way to Chancery Court in Delaware.

History has shown, however, it is risky to bet against Tesla. For all the money short-sellers now are making, they lost billions more in the previous decade. And Canaccord Genuity analyst George Gianarikas is among those who are confident the automaker will rebound yet again.

“When we look over the next six to 12 months, and over the next multiple of years, it’s actually pretty positive for Tesla,” Gianarikas says during an interview with Yahoo! Live. “They have an incredibly strong balance sheet to weather a recession. And on the other side, they are destined to increase their leadership in EVs, which we think are on the cusp of really penetrating the overall auto market.”

Perhaps. But the bears now outnumber the bulls and Tesla stock is heading into the New Year clearly feeling the effects of gravity.