Tesla suffered a major setback on Wednesday when its stock plummeted by 12 per cent. The decrease, equivalent to nearly £92.25 billion, followed CEO Elon Musk’s remarks about autonomous taxis and humanoid robots, which did not assuage investors’ fears about the electrical vehicle maker’s dwindling profit margins. As a result, Tesla’s lowest quarterly profit margin in half a decade was recorded late Tuesday, marking the fourth consecutive quarter that it has failed to meet earnings per share predictions.
This steep drop reduced Tesla’s market capitalisation to £700 billion, a significant decrease from its 2021 value of over £1 trillion. Despite possessing the title of world’s most valuable car manufacturer, Tesla’s worth heavily depends on investor anticipation of substantial future earnings found in yet-to-be-released products, like the much-anticipated robotaxis and robots.
Jeff Osborne of TD Cowen expressed scepticism about Musk’s optimism, as it appears centred around non-existent products, besides energy storage. Furthermore, Tesla has seen its electric vehicle deliveries decrease for two successive quarters, with no cheaper model introduced, prompting potential buyers to consider alternative electric vehicle manufacturers.
Tesla has had to reduce its prices and bolster incentives to stimulate sales for its outdated vehicle range. Musk acknowledged the growing competition, stating that other companies’ significant electric vehicle discounts have made the market more challenging for Tesla.
The company also announced that affordable models, earmarked for release in early 2025, would achieve less cost reduction than initially forecast. Additionally, the arrival of the much-anticipated robotaxi event is delayed until October.
With the setbacks and delays, UBS analyst Joseph Spak continues to caution investors by maintaining a “sell” rating on Tesla’s stock and suggesting that meaningful returns on Tesla’s AI efforts may take longer to arise.