Tesla, the pioneering electric carmaker led by entrepreneur Elon Musk, experienced a significant setback on Thursday as its stock price plummeted by over 12%. This sharp decline, wiping out approximately $80 billion in market value, followed Tesla’s warning of weaker sales growth projections for the year ahead compared to 2023.
In its annual earnings report released on Wednesday, Tesla disclosed that its sales growth for 2024 could be “notably lower,” despite implementing price cuts to stimulate demand. The company cited intensified competition from Chinese rivals like BYD and traditional automakers, leading to pricing pressures in key markets such as Europe and China.
Furthermore, Tesla highlighted challenges from elevated borrowing costs worldwide, as central banks maintain high-interest rates to combat inflation. These factors have collectively dampened demand and affected Tesla’s profit margins, compounded by increased research and development expenses and costs associated with ramping up production of its new Cybertruck.
Elon Musk, Tesla’s outspoken CEO, underscored the competitive threat posed by Chinese electric vehicle manufacturers. This warning comes in the wake of BYD surpassing Tesla as the world’s leading electric carmaker in the final quarter of 2023, signaling a shift in market dynamics.
Tesla’s disclosure of an impending slowdown marks a departure from its previous years of robust growth, reflecting broader concerns about weakening global demand for electric vehicles. The company acknowledged that it is currently “between two major growth waves” and disclosed plans to commence production of a new, lower-cost vehicle in the latter half of next year.
This latest development has contributed to a significant decline in Tesla’s stock value, with shares now down by more than a quarter since the beginning of the year. Investors are grappling with uncertainties surrounding Tesla’s future growth trajectory amidst intensifying competition, evolving market conditions, and shifting consumer preferences.
As Tesla navigates these challenges, its ability to innovate, adapt, and maintain its competitive edge in the rapidly evolving electric vehicle landscape will be closely scrutinized by investors and industry observers.
