Written by Nitya Wanchoo
As of lately, Tesla stock owners have been biting their nails watching “TSLA” take a dive in the market. The famous automotive and energy company has become a household name in recent years, primarily known for luxurious, environmentally friendly electric cars. These unique automobiles are notably characterized by their sleek modern designs, a massive TV-like instrument panel in lieu of a dashboard, and the capability to drive autonomously, to name just a few key factors. (NASDAQ, 2016) The volatility of their stock was due to Tesla’s production and supply chain challenges, competition from other automakers overseas, and Elon Musk’s public presence. Now, CEO and co-founder billionaire Elon Musk is doing everything in his power to bring Tesla’s stock back up.
As of the end of the first quarter, Tesla shares plunged 29%. This sets a record as the “worst period for the stock since the end of 2022 and the third steepest quarterly drop on record” and has led to over $230 billion lost in market cap. (Kolodny, 2024) Of all the companies in the S&P 500, Tesla had the most to lose. This was due, in large part, to four main factors. The first was a production stoppage in Europe due to Red Sea attacks and activist clashes. Environmentalists in Germany notably protested Tesla’s plan to expand to right outside of Berlin, going so far as to set the nearby electrical infrastructure on fire. Meanwhile, in Nordic countries, Tesla technical workers went on strike in the name of ensuring that “members have decent and safe working conditions” and demanding a collective agreement. (IF METALL) In Sweden, despite Musk’s anti-unionizing views, people are banding together to demand a collective agreement. Collective agreements, or agreements between trade unions and employer organizations without state interference, are the basis of the labor market model in Sweden. Typically, “the terms of the collective agreement include wages, form of employment, occupational pension, working hours, vacations, and periods of notice.” (IF METALL)
The next big factor was the unveiling of the brand new Tesla cybertruck, a pricey pickup truck. “After two years of missing deadlines, Musk announced that Tesla would start Cybertruck deliveries on Nov. 30, 2023. Since that day, TSLA stock has dropped more than 20%” (O’Brient, 2024) The truck caters to an untapped market as a “sustainable energy substitute for the roughly 6,500 fossil-fuel-powered trucks sold per day in the United States” (Alain Class Motors, 2019) but instead of and instead of being a raging success, it is proving to be a graveyard for potential earnings. Aside from being hideous, the trucks have become a novel failure. “Musk himself claimed the car was bulletproof at its unveiling before cracking its window with a steel ball thrown by hand.” (Paul, 2024) Additionally, the trucks, designed to be a superior off-road vehicle, have been shown getting stuck in sand, snow, and dirt. Owners have complained about functioning failures, steel exterior rusting, and delicate windshields, among other issues.
Thirdly, Elon Musk himself has proved to be a controversial figure, especially as the face of the company. He’s called for a red wave in the upcoming U.S. presidential elections (Musk, 2024), and he’s interacted heavily with far-right accounts. From a practical standpoint, this is poor publicity for Musk. His political ideology rests at opposite ends with the left-leaning audience his EV product caters to. Now, that’s reason enough for many people to simply refuse buying a Tesla.
Fourthly, and most importantly, Tesla’s popularity has plummeted in China, a major hotspot for EVs. Chinese electronic automobile makers are flooding the market with more affordable cars, selling at a third of what Tesla goes for on the market. Musk originally wanted to produce a model which would sell as an affordable family car, but the project got cut short. While Tesla was busy creating the cybertruck, they got beat out for the affordable family car by Chinese competition in that price range. “If Tesla had moved forward with the low-cost car, it wouldn’t have arrived on the market until the latter half of 2025, by the company’s estimate. But the entry-level EV segment is already crowded with compelling models from BYD and many other Chinese brands.” (Reuters, 2024) So, Tesla as a major electronic car competitor in China no longer looks likely.
Now, Tesla’s looking for a new place to make money: India. According to reports, Musk will be visiting India and Prime Minister Narendra Modi towards the end of April, along with other government officials. While here, he plans on scouting locations and discussing business propositions for setting up an EV plant in India.The company is looking at areas near Gujarat and Maharashtra to set up camp, and it’s speculated that soon, Tamil Nadu may also pitch itself as a potential manufacturing site. In fact, “Tesla is said to have committed $2 billion to its upcoming plans in India.” (Karthik, 2024) This comes a month after the government publicly announced that it would lower import taxes for certain EV companies who are willing to commit to at least $500 million in investment. (TIMESOFINDIA, 2023) Moreover, investing in India could solve Tesla’s supply chain problems. The proposed India IMEC (India to Middle East to Europe Economic Corridor) transit route offers a reliable alternative shipping route to the Red Sea shipping route which is suffering from the attacks. (Iyer, 2024) Lastly, in early 2023, the discovery of lithium reserves in Jammu and Kashmir was announced. “The estimated reserve of 5.9 billion tonnes would make India one of the world’s largest lithium producers.” (Iyer, 2024) The access to lithium for car batteries could make India the ideal sport for EV manufacturing.
I know I’m losing money right now, but I’m staying hopeful. Despite Tesla’s struggles during the first quarter, they’ve managed to bring their stock up by almost 5% in the last month. In fact, Elon Musk has largely characterized this decline as a period of growth. He’s hoping to make massive waves in two large industries: “Full-Self-Driving, [next-generation] vehicle and energy storage” (Baccardax, 2024) That, coupled with the prospect of an up and coming EV industry in India, could be a good sign.
EV manufacturers will come and go, and Elon Musk certainly has enough money in his pockets to get him by for a while. So, the big question on everyone’s minds is whether they should buy, sell, or hold their Tesla stock. Only time will tell. Will Tesla be able to make it back to the top, or has Musk finally bitten off more than he can chew?
References
Alain Class Motors. (2019, December 4). Tesla launches their first pickup truck: “CYBERTRUCK.” Alain Class Motors. https://www.alainclass.com/tesla-launches-their-first-pickup-cybertruck
Baccardax, M. (2024, April 3). Analysts see big strategy shift from Elon Musk after Tesla delivery debacle. TheStreet. https://www.thestreet.com/investing/stocks/analysts-see-big-strategy-shift-from-elon-musk-after-tesla-delivery-debacle
Reuters. (2024, April 5). Exclusive: Tesla scraps low-cost car plans amid fierce Chinese EV competition. Reuters. https://www.reuters.com/business/autos-transportation/tesla-scraps-low-cost-car-plans-amid-fierce-chinese-ev-competition-2024-04-05
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Karthik, H. (2024, April 11). Tesla in talks with Reliance to set up EV manufacturing arm in India. BusinessLine. https://www.thehindubusinessline.com/companies/tesla-in-talks-with-reliance-industries-ril-to-set-up-local-manufacturing-arm-in-india/article68047359.ece
Kolodny, L. (2024, March 29). Tesla’s awful quarter has Wall Street on edge ahead of delivery numbers. CNBC. https://www.cnbc.com/2024/03/29/tesla-stock-drops-29percent-in-first-quarter-as-global-dominance-wanes.html
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O’Brient, S. (2024, February 8). How the Tesla Cybertruck will crash Tesla stock in 2024. InvestorPlace. https://investorplace.com/2024/02/how-the-tesla-cybertruck-will-crash-tsla-stock-in-2024
Paul, K. (2024, April 20). What the Cybertruck’s many failures mean for Tesla. The Guardian. https://www.theguardian.com/technology/2024/apr/20/cybertruck-failures-tesla-elon-musk
Russell, C. (n.d.). Two white and red Tesla charging station · Free stock photo. Pexels. https://www.pexels.com/photo/two-white-and-red-tesla-charging-station-2480315
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