Motor Mouth: Tesla’s stock is in the toilet and it’s Elon’s fault

Shares in TSLA are down by more than half in the last two years, and a study points the finger at the controversial CEO

Tesla’s stock is tanking. As we went to press, TSLA is down some USD$10 — more than five per cent — from yesterday’s close. The reason for this latest plummet? The EV market leader sold just 386,810 cars in the first quarter, down some 8.5 per cent from this time last year, and a long way from the 460,000 units many analysts were expecting. Loyal protagonists will no doubt remind us Tesla has still made them money — a bit over 800 per cent over the last five years — but right now, it’s starting to look like a bit of a dumpster fire.

Although still a highly valued company — Tesla’s market capitalization currently stands at just below $550 billion — that’s down some 55 per cent since its absolute peak in late 2021. Worse yet, much of that drop — some 40 per cent since a smaller, more recent peak late last summer — is post-pandemic, and can no longer be blamed on restrictions and mandates.

The fact is Tesla is struggling with an aging car line (its top-of-the-line Model S is a geriatric 12 years old); is getting its butt kicked by upstart Chinese automakers (TSLA was down 1.4 per cent in pre-market trading this morning on the news that smartphone manufacturer Xiaomi just launched its first cars); and, perhaps worst of all, is being undone by the ever-broadening realization, even amongst its fans, that Tesla really is just a car company.

Chinese electronics company Xiaomi’s first electric vehicles, the Xiaomi SU7 range, are seen on display at a launch event in Beijing on March 28, 2024
Chinese electronics company Xiaomi’s first electric vehicles, the Xiaomi SU7 range, are seen on display at a launch event in Beijing on March 28, 2024Photo by Michael Zhang /Getty

This last is a paradigm shift. Until most recently, TSLA was being valued as a tech company, and was even included in the fabled Magnificent Seven — Apple, Microsoft, Nvidia, Meta, Amazon, and Alphabet, as well as the Texas-based automaker — that have driven the Dow Jones to record heights.

More recently, however, it’s been behaving like a traditional automobile manufacturer. The first indication of this fall from grace were the massive price cuts over the last year, as the company scrambled to keep up its record of quarter-over-quarter sales growth. More recently, it’s been Tesla’s first foray into traditional advertising, something a haughty Musk once decried: “I hate advertising.”

Most telling perhaps — certainly more damaging to the concept that TSLA should be valued as a tech stock and not an auto company — is that Tesla has started giving away Full Self Driving (FSD) semi-autonomous software.

That’s a huge blow to Tesla’s valuation. Officially priced at USD$12,000 — or available as a USD$199-a-month subscription — not so very long ago, Tesla proponents were crediting FSD as a large part of the company’s outrageous stock price and price-to-earnings ratio. Tesla’s lead in autonomous driving, went the storyline back then, was so insurmountable that the then-Silicon-Valley giant would “own” the self-driving taxi market. Now, anyone walking into a Tesla store can get a month of FSD-ing — keep your hands on the wheel! — for free. Once and for all, guys, Tesla is a car company.

According Caliber’s “consideration score,” fewer than 31 per cent of new-car buyers are now considering the purchase of Tesla-branded automobiles, down from over 70 per cent in November 2021. In fact, Tesla’s consideration score fell 8 per cent in January alone, suggesting the downward spiral is picking up pace. Likewise, the number of people who “trust and like” the brand is down some 25 per cent in the same time period.

SpaceX, Twitter and electric car maker Tesla CEO Elon Musk reacts as he speaks during his visit at the Vivatech technology startups and innovation fair at the Porte de Versailles exhibition center in Paris, on June 16, 2023
SpaceX, Twitter and electric car maker Tesla CEO Elon Musk reacts as he speaks during his visit at the Vivatech technology startups and innovation fair at the Porte de Versailles exhibition center in Paris, on June 16, 2023Photo by Alain Jocard /Getty

More dramatically, Caliber noted a strong association between Tesla’s public image and that of its CEO, Elon Musk. A separate survey cited by Reuters, this time by analytics firm CivicScience, shows Musk’s “unfavourable” rating amongst American consumers rose by almost 25 per cent between April of 2022 and February 2024.

“It’s very likely that Musk himself is contributing to the reputational downfall,” Caliber CEO Shahar Silbershatz told Reuters, noting the survey shows 83 per cent of Americans connect Musk with Tesla. And while it’s true that the reasons cited above — an aging model lineup, economic fears, etc. — have contributed to Tesla’s woes, Musk’s right-wing politics, amplified by his now unfettered access to X-cum-Twitter, is turning off a significant portion of the population. Indeed, things appear so bad that the recent “EV slowdown is shaping up to be a Tesla slowdown,” Cox analyst Stephanie Valdez Streaty told Reuters during a conference call.

The EV slowdown is shaping up to be a Tesla slowdown

Stephanie Valdez Streaty, Cox analyst

Nor is the United States the only place where Tesla’s brand reputation has taken a hit thanks to Musk’s shenanigans. According to brand valuation report also cited by Reuters, Tesla’s reputation also fell in Sweden, Australia, the U.K., the Netherlands, and, by some 14 per cent, right here in Canada. “A modest but growing number of EV shoppers are increasingly put off by Elon Musk’s behavior and politics and are now finding viable alternatives to Tesla in the marketplace,” Ed Kim, president of California-based consultancy AutoPacific, told Reuters.

Now, to be sure, Tesla remains North America’s premier manufacturer of electric vehicles. It also retains the highest brand loyalty amongst all major car brands, be they electrically-powered or otherwise. It’s also true that Tesla (and Mr. Musk) have not suffered any reputational damage in China, now the world’s largest auto market.

Tesla Cybertruck at 2024 Canadian International Auto Show.
The Tesla Cybertruck at 2024 Canadian International Auto Show in TorontoPhoto by Andrew McCredie

And there is a chance all these naysayers will scatter if Tesla can indeed deliver its long-promised USD$25,000 battery-powered entry-level sedan. But this last, like so much of Tesla, depends on Musk’s reputation, which, if you have followed his promises of delivery dates and price-points, is spotty at best. Those, well, let’s call them exaggerations of the past — the Cybertruck’s production timing and pricing being just the latest — would seem to be finally catching up with Musk.

The big question is whether he can pivot to be the kinder, more considered leader that mainstream corporations mandate; or if he’ll continue to be the polarizing firebrand that rocketed Tesla to the top of the automotive industry, but now threatens to disrupt its own disruption. With the competition for EV supremacy getting tougher, the price of his often mercurial pronouncements would seem to be getting stiffer.

Oh, and to leave you with one last financial indicator of the automaker’s health, TSLA is down some 50 per cent versus where it was before Musk’s purchase of Twitter—sorry, “X.”

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