Elon Musk’s image crisis is spreading like an oil stain. Not only Twitter, the social network that bought it for $44,000 million in late October, is in controversy amid a flight of users and massive pullbacks from advertisers. Tesla Motors, the electric car company he founded in 2003, plunged in the stock market, falling 11.4% in Tuesday’s session, which dragged the Nasdaq into the red after learning it had halted production in China , which raises doubts about future demand. It’s true that Tesla’s rally — seven straight days of losses, its longest streak since 2018 — is part of a decline in other stocks, including its main peers, but Musk’s theatrical behavior casts many doubts over the viability of their companies.
Tesla has posted the worst week of its existence in terms of the stock market, posting $109 per share and its lowest close since August 2020, amid a pandemic. “The stock has been under severe pressure since media reports that production in China could be slowing down,” particularly at its Shanghai plant, Dan Ives, a Wedbush analyst, told Agence France Press on Tuesday.
It is not known whether Tesla is in freefall as a cause or as a result. And with the dip on Tuesday, it has lost 69% of its value on the stock market so far this year, in an initially favorable but also highly competitive context: the clear impetus for the use of electric cars by the US President, Joe Biden, almost as government policies to boost national industry while combating climate change. The federal government will subsidize the purchase of this type of vehicle from March (the bonuses were intended for January, but their application has been delayed by two months). The fatal accidents of some of the brand’s models don’t help either, let alone the cacophony that has surrounded their manager, whom Nobel Prize winner Paul Krugman described as a “capricious oligarch”, since his noisy landing on Twitter.
Musk, Tesla’s largest shareholder, has sold $23 billion worth of shares in the company since his interest in Twitter became known in April. In last week’s Twitter Spaces conference, the world’s richest man – who lost the title to France’s Bernard Arnault two weeks ago – vowed he would not relinquish any more Tesla titles until at least 2024 or even later. But the system of communicating vessels that connects the fates of Tesla and Twitter makes it difficult for him. Shares in the first have lost 66% of their value since April (when the tycoon bought more than 9% of the social network and became its largest shareholder), with a 45% drop since the transaction closed in late October. In the same month, the electric vehicle maker announced that it would miss its delivery target for this year.
lower demand
However, the temptation to believe that Musk’s love affair with Twitter was primarily responsible for Tesla’s downfall is nothing but a delusion, experts warn. You name intrinsic problems in the automotive group that go much further. In the run-up to Christmas, investors worried about deteriorating sales and earnings prospects. One signal raised the alarm about growing weakness in demand: the announcement of a significant price cut for the Model 3 and Y in the US. The company has offered two consecutive price reductions to those who buy a vehicle before the end of the year. with an initial rebate of $3,750 earlier in the month, rising to $7,500 last Wednesday. It has also started offering 10,000 miles (16,093 km) of free top-ups for vehicles delivered in December. Buyers of Tesla cars in Canada and Mexico, and to a lesser extent in China, will also enjoy offers appropriate to the local market.
A day after announcing the second discount of its top models, Tesla shares remained at 8.9% on Wall Street without further Twitter controversy. The rebates are particularly noticeable after Tesla’s sustained price hikes over the past two years, which blamed the rise on supply chain disruptions and inflation. With the first resolved and the second likely reduced, no one, let alone shareholders, can explain Musk’s sudden generosity given the past two months of data.
The tycoon himself gave a hint by projecting his fears of a 2023 recession should the Federal Reserve’s fight against inflation cool the economy. Last week, on the Spaces Twitter forum, the businessman said he expects the economy to enter a “serious recession” in 2023 and demand for luxury goods like his cars — the Model 3 costs $47,000 and the Y more than $65,000 — to fall will.
Tesla’s poor performance pushed the company out of the top 10 list of companies in the S&P 500 index. Between the stock debacle and its online outbursts, such as the continued taunting of Twitter users with misleading polls and the blacklisting of undesirable journalists, shareholder nervousness is on the rise. What future awaits Tesla? Jeffrey Osborne, an analyst at Cowen, is clear: “Our feeling is that the company’s market share has peaked,” he told Bloomberg on Tuesday. Says a well-known defender of Musk’s career and achievements.
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