Tesla shares take a breather but stare at record annual slump on Wall Street

Tesla

Thursday was a sigh of relief for Tesla as it closed more than 8 percent higher. This was the second straight day of gains, after a seven-day losing streak which dragged it down 31 percent.

The year 2022 is seen as the worst year for stocks since the Great Recession, several big names are headed for their worst year on record, among which is Tesla eyeing worst annual slump on record.

The bears have marched the Tesla stock hard this year. The intensified sell-off on Wall Street sank the Tesla shares more than 11 percent on Tuesday.

Tesla has dived more than 37 percent in December alone, and 73 percent from their record high in November 2021. One of the great winners of the pandemic, having surged more than 740 percent in 2020 on the back of booming demand and rock-bottom interest rates, Tesla has declined to about 65 percent this year and wiping out over $670 billion in market value, according to Marketwatch.

Elon Musk, the CEO of the Texas-based company has been busy with his new role as the chief of California-based social media company, Twitter. Musk haven’t delivered positive headlines since his takeover.

Twitter has been bleeding cash. Musk has slashed Twitter’s staff from 7,000 to about 2,000. He’s claimed Twitter might go bankrupt. According to some media reports, he has stopped paying rent for Twitter’s offices, and directed staff not to pay vendors. He’s announced his intention to step down as Twitter’s CEO, which in fact, is the most popular move according to Twitter users.

Also Read | Elon Musk warns against margin debt on risk of market ‘mass panic’

Tuesday’s plunge in the Tesla stock was triggered by a Reuters report that the company was planning to run a reduced production schedule in January at its Shanghai plant.

A Reuters analysis showed that prices of used Tesla cars were falling faster than those of other carmakers, weighing on demand for the company’s new vehicles rolling off the assembly line.

Musk had addressed these issues previously and attributed the struggles to rate hikes from the Federal Reserve, stating “people will increasingly move their money out of stocks into cash, thus causing stocks to drop”.

Meanwhile, investors are gritting their teeth as Musk repeatedly broke his promise of not offloading Tesla stocks. The billionaire Musk sold around $8.5 billion in stock in late April, pledging on April 29 that “no further TSLA sales planned after today”.

According to regulatory filings, he sold another almost $7 billion on August 10. That followed the same promise that he broke once again on November 8 as he sold some $4 billion; he cashed out another $3.6 billion on December 14.

Apart from that, Tesla has also been facing challenges associated with a slowing global economy, Covid troubles and tight competition with home-grown companies in China, its largest market.

Tesla’s main competitor in China, BYD, sold almost 600,000 "new energy vehicles" in November, according to Barrons while Tesla recalled nearly that many of its Chinese cars in 2022 due to safety issues.

Also Read | Tesla was 4-1/2 times the size of Exxon, now its only 16% bigger

To battle the weakening demand back home, Tesla has announced a sale. The company offered two rebates for buyers who take delivery of a vehicle before the end of the year, initially offering a $3,750 discount earlier this month. Tesla then doubled that to $7,500 last Thursday.

Meanwhile, S&P Global reports that while Tesla is still a market leader in the EV segment, it makes 65 percent of the EV market in the US, that number is down from 79 percent in 2020 and it’s expected to drop another 20 percent by 2025.

However, the Tesla chief, has sent an email to his staff, asking them not to be “bothered by stock market craziness” and that Tesla will be the most valuable company on earth, long-term, as reported by Reuters on Wednesday.