Tesla’s stock has experienced a significant decline in the past month, dropping more than 40% and leaving the company’s shares two-thirds lower than their September level. The dramatic drop has resulted in a loss of nearly $900bn from Tesla’s 2021 peak, with the company’s stock market value falling to $355bn.
There are a variety of factors contributing to this decline. One is the mismanagement of CEO Elon Musk’s public persona. Musk has long claimed that his presence on Twitter has been of great benefit to Tesla shareholders, and while this may have been true when the company was experiencing growth, his recent actions on the platform have served to tarnish both his personal brand and that of Tesla. In the two months since he took over the social media platform, Musk has fueled chaos and polarization, leading to a decline in public perception of both himself and the company.
Another factor contributing to the stock’s decline is Musk’s apparent lack of focus on Tesla when the auto industry is facing uncertainty and competition in the electric vehicle market is increasing. His decision to turn his attention to Twitter at this critical juncture has been seen as poor judgment, even if it is only temporary.
Furthermore, Musk has treated his Tesla stock holdings as a personal piggy bank, selling nearly $40bn worth of shares even after stating that he would stop. With his current stake in the company now worth $51.7bn, these disposals have significantly impacted the stock’s value.
All of these issues have contributed to the breakdown of the “stock market spell” that Musk had managed to create around Tesla, leading to a “savage re-rating” by investors. In addition to these challenges, the company is facing declining customer waiting lists in its two largest markets, the US and China, as well as rising inventory levels and pressure on profit margins.
In order to sustain its rapid expansion and maintain its position as a leader in the electric vehicle market, Tesla will need to take action to address these issues. The company has already warned of increasing inventory levels and pressure on profit margins in the coming quarter. It has started offering incentives to encourage customers to take delivery of a Model 3 or Model Y before the end of the year. However, with higher interest rates and an uncertain economy on the horizon, the road ahead may be rough for Tesla.