Tesla stock drops 29% in first quarter as global dominance wanes

It was a brutal first quarter for tesla investors.

The electric car maker’s stock price fell 29% in the first three months of the year, its worst quarter since the end of 2022 and the third worst quarter since Tesla went public in 2010. The company was also the biggest loser in the S&P 500. .

Wall Street’s biggest concern is Tesla’s core business. The company is expected to announce first-quarter vehicle production and deliveries in the coming days, but even bulls are predicting weak results despite price cuts and buyer incentives dangling throughout the quarter. There is.

As of Thursday, the last business day of the quarter, analysts had expected about 457,000 deliveries for the same period, according to an average of 11 analyst forecasts compiled by FactSet. This is an 8% increase from 422,875 people in the same period last year. Deliveries for the quarter are estimated at between 414,000 and 511,000.

Analysts who updated their numbers in March were the most bearish, with estimates ranging from 414,000 to 469,000. Independent auto industry researcher Troy Tereich said he expects the company’s delivery numbers to be lower than the lowest estimates found by FactSet.

Deliveries are the closest thing to Tesla’s reported sales, but they are not precisely defined in the company’s shareholder communications.

There are four main reasons for Tesla’s decline in the first quarter.

China is facing an onslaught of competition from all-electric vehicles, including new models that are cheaper than Tesla’s popular Model Y SUV and Model 3 sedan.

Towards the end of 2023, China’s BYD has dethroned Tesla as the world’s top EV maker. In the first quarter of this year, BYD continued the pressure, launching the Qin Plus EV with a starting price of about $15,200, followed by the BYD Seagull, a small all-electric hatchback with a starting price of less than $10,000.

Chinese smartphone company Xiaomi is getting into the game with its first vehicle, an all-electric SUV that is much cheaper than Tesla’s entry-level Model 3 sedan. Xiaomi CEO Lei Jun said that the standard version of the SU7 will be sold in China for the equivalent of $30,408, admitting that at this price the company will be losing money every time it sells it.About Tesla Model 3 Another $4,000 than that.

Tesla lowered prices in response, but sales remained sluggish.

Tesla sold 71,447 Chinese-made cars in January, of which 39,881 were sold domestically, down from December, according to data from the China Passenger Car Association. In February, the number of Chinese-made Teslas, including exports, decreased again to 60,365 units.

In response to the drop in sales, Tesla has cut production at its Shanghai factory and changed the working hours of its staff from 6 1/2 days to 5 days a week, Bloomberg reported. first reported.

Tesla did not provide guidance for 2024 in its January earnings release, but analysts say Tesla’s struggles in China portend a difficult quarter, if not a full year.

Deutsche Bank analyst Emmanuel Rosner lowered his price target on Tesla this week, citing weaker-than-expected sales in China and the company’s recent plans to cut production in the region. Rozner now expects Tesla to report 414,000 deliveries in the first three months of 2024, predicting Tesla’s annual growth rate will be only in the mid-single digits.

Red Sea attacks spark activist clashes in Europe

There was drama in Europe as well.

Other manufacturers, including Tesla and Volvo, halted some production on the continent in January due to parts shortages following attacks on shippers in the Red Sea. Attacks by Iranian-backed Houthi militias continue to disrupt one of the world’s busiest routes.

And in March, there were dramatic protests by environmentalists in Germany. Demonstrators set fire to electrical infrastructure near the Tesla factory in protest of Tesla’s plans to expand the site of its car and battery factory in the Berlin suburb of Brandenburg. Although the fire did not spread to the factory, production was forced to temporarily halt due to insufficient power to operate the facility.

CEO Elon Musk visited a factory in Germany to reassure workers after the attack. He also called the protests “extremely stupid.” Rohan Patel, Tesla’s head of policy, told X magazine that Tesla’s mission is to “build zero-emission products,” but to do that well, “we have a culture of doing the right thing in our communities. We are also focused on creating the most sustainable factories.” . ”

Meanwhile, Tesla service technicians and other workers are on strike in the Nordic countries. Swedish trade union IF Metal. Labor groups have been pressuring Tesla to negotiate with workers and sign a collective bargaining agreement since October 2023.

According to IF Metall’s website, nine out of 10 workers in Sweden are union members, but like in the United States, Tesla has resisted unions and rejected IF Metall’s bargaining efforts.

Aging lineup, early stages of Cybertruck

Although EV sales remain popular around the world, their growth rate is slowing. And every new product becomes more important because Tesla is no longer the dominant player. There isn’t much in the hopper.

Cybertruck is still in its early stages and has a niche audience. The company began deliveries of angular, unpainted steel truck models in December at a promotional event in Austin, Texas.

Musk previously said on an earnings call that Tesla “digged itself into a grave” with the sci-fi-inspired Cybertruck. In a late 2023 interview with Tesla fan and car critic Sandy Munro, Musk said that the Cybertruck “isn’t going to be important to Tesla’s finances” in 2024, and that “it will probably be important in 2025.” “It will be,” he warned.

Tesla is preparing to produce a refreshed Model 3, known as the Highland, in Fremont, California. “The change in appearance is subtle,” wrote Larry Magid of Forbes magazine. He also disliked Tesla’s controversial design decision to omit the “stem” from the side of the steering wheel. Highland drivers use buttons and on-screen controls to toggle between driving, reversing, and parking, as well as to signal turns and lane changes.

Tesla is developing an all-new, more affordable platform that fans are calling the “Model 2.” But it won’t be delivered to customers for years.

Musk continues to bet that Tesla’s customers and shareholders will stick with the company, even as he makes increasingly inflammatory statements about X and beyond.

Earlier this month, Musk met with the former president. Donald Trump in Florida.He was called for “red wave” and the upcoming US election, he shares, likes, and otherwise promotes far-right accounts and content on X, and currently has 178.8 million registered followers. There is. He has repeatedly disparaged illegal immigrants, railed against corporate diversity efforts, and made ridiculous claims such as: Haitian immigrants are cannibals.

Mr. Musk’s political ideology is at odds with the group of people most likely to buy his products.research shows that electric car supporters tend to be ideologically left-leaning. pew research and gallup last year.

Musk also bet that Tesla’s shareholders and board of directors would follow his lead. A Delaware judge found that the board’s “compensation plan was fair.”

Before the ruling, Musk had begun pressuring shareholders and Tesla’s board of directors to increase control over the EV maker.

In a January post, Musk said he was “uncomfortable with building Tesla into a leader in AI and robotics without having up to 25% voting control.”

Investor Ross Garber, a longtime Tesla bull, said the request amounted to “blackmail.” Interview with CNBC.

This adds up to more than $230 billion in lost market capitalization for Tesla and its shareholders since calendar year 2024. This made it a very favorable quarter for short sellers who were expecting such a downturn.

Tesla short interest rose by more than $5.77 billion in 2024, making it the most profitable stock in the U.S., according to data from S3 Partners. As of Thursday’s close, short interest was approximately 3.76% of the stock’s float, representing a notional value of $18.71 billion.

Brad Gerstner of Altimeter Capital Buy dip. Gerstner told CNBC this week that the company is making “significant, accelerated progress” in its work on self-driving technology.