Tesla Inc. is on track for its worst annual stock performance as investors react to Elon Musk’s ownership of Twitter Inc., declining demand for the car company’s electric vehicles, and market slumps in a higher-interest-rate environment.
Tesla’s share price decline represents a significant reversal for the world’s most valuable car company. The electric-vehicle manufacturer had been one of the auto industry’s biggest winners in the early 2020s, a period marred by chip shortages, clogged global supply chains, and Covid-19-related shutdowns.
Since the stock reached an all-time high in November 2021, the company has lost roughly 70% of its value. Global economic uncertainty is increasing, and consumers have a growing selection of other electric vehicles to choose from, raising concerns on Wall Street that Tesla may have to sacrifice profitability to maintain its current growth rate.
Tesla’s stock price drop has outpaced that of the broader market and its competitors, though some electric-vehicle startups have fared worse.
On a high note
Tesla entered 2022 in good shape, buoyed by better-than-expected results throughout the Covid-19 pandemic and competitive vehicle pricing.
The company has delivered more than a dozen consecutive profitable quarters, assisting the electric-vehicle maker, which previously had a track record of being cash-strapped, in amassing a roughly $20 billion cushion, comparable to that of some legacy car manufacturers.
After an extended Covid-related shutdown of the company’s largest assembly plant in Shanghai, Wall Street reduced its expectations for Tesla’s growth this year.
Rising interest rates and global economic uncertainty have fueled fears that demand for new vehicles is dwindling. Customers faced months-long waits for many Tesla models as recently as earlier this year. Not any longer.
In China, Tesla cut prices this fall and is offering various incentives to get cars off the lot and into customers’ driveways before the new year. In the United States, Tesla is offering $7,500 in credit and 10,000 miles of free fast-charging if they agree to take delivery this month.