Leading American electric automaker Tesla has just recorded its weakest year entry ever, with over $94 billion market valuation drop in early 2024. According to BNN Bloomberg, the notable decline occurred in just the first two weeks of the new year partly due to waning EV demand.
Tesla’s loss
As mentioned, Tesla’s market valuation substantially dropped to more than $94 billion within just two weeks. It is not that surprising, considering the apparent demand slowdown, particularly in the US market.
“Investors’ main concern on Tesla is stagnating growth.”
Cowen analyst Jeffrey Osborne stated in an interview
The market analyst further noted that the major price cuts in the Chinese market intensify these demand concerns as it seems to become a “race to the bottom for the EV industry given the intense competition in that market.”
Alarmingly, it marks the American brand’s highest market capitalization decline in the same period since its public debut in 2010.
The 12% drop since January is currently the worst record, following a 14% stock decline in 2016.
Main factors
Tesla’s market cap decline is partly due to various factors, including Hertz’s sudden move to dump about 20,000 EVs (including Teslas), the Chinese market’s ongoing price cuts, rising labor costs, and Red Sea supply disruptions. All these hint that demand for electric vehicles is slowing down globally, particularly in the US market.
Tesla’s price cuts to boost demand also caused a constant drop in its once-strong profit margin. In fact, its Q3 2023 automotive gross margin ex-regulatory credits dropped YoY from 27.9% to 16.3%.
“We are going through a cyclical downturn for EVs, but competitive dynamics are exacerbating the cyclical pressures. Price cuts and plummeting margins are all a function of these unfavorable competitive dynamics.”
Ivana Delevska, Spear Invest’s Chief Investment Officer said in an interview
Tesla remains the market leader
The notable decline in Tesla’s market cap aligns with its forecast about the EV demand slowdown in its Q3 2023 Earnings report in October.
In the fourth quarter, Chinese rival BYD managed to beat Tesla with its sales of 526,409 BEVs. The Musk-led company only sold 484,507 units in the same period.
Nonetheless, Tesla remains the electric vehicle market leader. BYD indeed exceeded Tesla’s Q4 2023 sales, but it still falls short in revenue and profits. The Chinese giant has also yet to penetrate the US market, unlike Tesla.
Tesla’s market valuation drop also decreased Elon Musk’s personal wealth by $23 billion so far this year. However, the company’s true value lies in its imminent achievement of fully autonomous vehicles.
