The most valuable carmaker in the world, Tesla, had a sharp change of events on Thursday when its shares fell 12%, devaluing the company by an astounding $80 billion. This was the worst day for the company in the last twenty-one months, as the stock dropped to its lowest point since December 2022. The drop came after Tesla issued a warning over the slowing increase in sales of electric vehicles and the impending danger posed by Chinese competitors.
Tesla said on a Wednesday earnings call that its sales growth for the year would be far lower than anticipated. The company attributed this to the ongoing development of their “next-generation” vehicle, which is probably going to be a less expensive model. Investors were dissatisfied that the company did not meet their anticipated yearly growth rate of 50% averaged over multiple years, despite a notable 38% increase in deliveries over the previous year.
The worries were heightened by Tesla’s latest quarter’s financial reports. Despite exceeding $25 billion in revenue, adjusted earnings per share decreased by 40% from the prior year and fell short of market expectations. This was the second quarter in a row that the company missed analyst earnings projections, after a string of better-than-expected results starting in 2021.
The biggest one-day drop in the stock price occurred on Thursday, the greatest since late April 2022, when supply chain obstructions brought on by the pandemic prompted Tesla to briefly close its Shanghai facility owing to a coronavirus outbreak.
Elon Musk acknowledged Chinese automakers’ competitiveness on the earnings call due to their growing presence in the market, particularly BYD. Musk went so far as to say that in the absence of trade barriers, Chinese automakers might take the lead in the world market, which would be problematic for other foreign automakers.
Following Tesla’s earnings call, analysts expressed dissatisfaction, raising concerns about declining margins and a dearth of strategic discernment. Still, other people are bullish about the future, believing that the introduction of Tesla’s more affordable car in the upcoming years may serve as the impetus the company needs. Additionally, since many people finance their car purchases, the promise of decreasing interest rates is perceived favorably by Tesla and the larger automotive industry. Despite the recent difficulties, some observers think that with the correct tactical choices and a shifting economic landscape, Tesla’s fortunes might improve.