Elon Musk’s brand image crisis is spreading like an oil stain. It is not only Twitter, the social network that it bought at the end of October for 44,000 million dollars, which is balanced on the wire of controversy, in the midst of a rout of users and the massive withdrawal of advertisers.
Tesla Motors, the electric car company that he founded in 2003, chains resounding falls on the stock market, with a decrease of 11.4% in the session on Tuesday that dragged the Nasdaq to the red, after learning that it has cut its production in China, which increases doubts about future demand. It is true that Tesla’s bump – seven days in a row of losses, the longest streak since 2018 – is part of a decline in other values, including its main competitors.
Tesla has scored the worst week of its existence in stock market terms, with a value per share of 109 dollars and the lowest closing since August 2020, in the midst of a pandemic. “The title has been under intense pressure since the media have reported that production could suffer a slowdown in China,” specifically at its Shanghai factory, explained Dan Ives, a Wedbush analyst, quoted by Agence France on Tuesday.
It is not known if as a cause or as an effect, Tesla is in free fall. And with the bump on Tuesday, it has lost 69% of its value on the stock market so far this year, in a context that is initially advantageous, but also highly competitive: the clear impulse to the use of electric cars by the US president, Joe Biden, almost as a state policy to promote national industry and at the same time combat climate change. The federal government will subsidize the purchase of this type of vehicle from March (the bonuses were scheduled for January, but their application has been delayed two months). The fatal accidents suffered by some of the brand’s models do not help either, but much less the cacophony that surrounds its manager, described as a “capricious oligarch” by the Nobel Prize winner for Economics Paul Krugman.
Musk, Tesla’s largest shareholder, has sold $23 billion of shares in the company since his interest in Twitter became known in April. In a Twitter Spaces call last week, the world’s richest man — he lost the title two weeks ago to Frenchman Bernard Arnault — vowed he wouldn’t get rid of any more Tesla titles until at least 2024, or even later. But the system of communicating vessels that links the fate of Tesla and Twitter is making it difficult for him. The shares of the first have lost 66% of their value since April (when the tycoon bought more than 9% of the social network and became its largest shareholder), with a decrease of 45% since the deal was closed. the end of October. In that same month,
Lower demand
However, the temptation to think that Musk’s love affair with Twitter is primarily responsible for Tesla’s plummet is nothing but a misconception, experts warn. They cite intrinsic problems in the automobile company go much further. In the run-up to Christmas, investors began to worry about worsening sales and earnings prospects. One signal sounded the alarm about the growing weakness in demand: the announcement of a substantial reduction in the price of the 3 and Y models in the US. The firm has offered two consecutive reductions to those who purchase a vehicle before the end of year, with an initial discount of 3,750 dollars at the beginning of the month that last Wednesday went up to 7,500 dollars. It has also started offering free charging for 10,000 miles (16. 093 km) for vehicles delivered in December. Buyers of Tesla cars in Canada and Mexico, and to a lesser extent in China, will also be able to enjoy offers according to the local market.
One day after announcing the second discount of its best models, Tesla shares were left on Wall Street at 8.9% without another Twitter controversy. The discounts are especially striking after Tesla’s continued price hikes over the past two years, which blamed the rise on supply chain disruption and inflation. With the first solved and with the appearance of reducing the second, judging by the data of the last two months, no one, and even less the shareholders, can explain Musk’s sudden generosity.
The tycoon himself gave a clue by projecting his fears of a recession in 2023 if the Federal Reserve’s fight against inflation ends up cooling the economy. At the Twitter Spaces forum held last week, the businessman said he expects the economy to enter a “serious recession” in 2023 and demand for luxury items like his cars — the Model 3 costs $47,000 and the Y, more of 65,000—is reduced.
Tesla’s poor performance has pushed the company out of the top 10 list of companies in the S&P 500 index. unwelcome journalists, shareholder nervousness is on the rise. What future awaits Tesla? Jeffrey Osborne, an analyst at Cowen, is clear about it: “Our feeling is that the company’s market share has peaked,” he said Tuesday in statements to the Bloomberg agency. Says a well-known defender of Musk’s career and achievements.
