In 2024, Tesla's market value has dropped by more than $94 billion, and Jeff Bezos is vying with Elon Musk to become the wealthiest person in the world

In 2024, Tesla's market value has dropped by more than $94 billion, and Jeff Bezos is vying with Elon Musk to become the wealthiest person in the world

In 2024, Tesla's market value has dropped by more than $94 billion, and Jeff Bezos is vying with Elon Musk to become the wealthiest person in the world

Tesla Inc. had a spectacular year in 2023, with its shares more than doubling in just a single year. However, 2024 is getting off to a different start, with Elon Musk's electric car manufacturer experiencing its worst-ever start.

In only the first two weeks of 2024, the company's market capitalization dropped by more than $94 billion. Given the deluge of bad news that has befallen the Austin, Texas-based EV manufacturer, it's easy to see why: China-made vehicles represent Hertz Global Holdings Inc.'s one about-face on EVs. Another price decrease, and indicators of growing labor expenses.

All of this is happening despite the market for EVs growing slowly, particularly in the US.

In an interview, Jeffrey Osborne, a Cowen analyst, said that "stable growth is investors' main concern on Tesla." Those worries are heightened by the price reductions in China, which seem to be "a race to the bottom for the EV industry given the strong rivalry in that market."

During the same time since coming public in 2010, this is the largest decline in Tesla's market value at the start of the year. The stock plunged 14% in the first nine trading days of 2016, making Tesla's 12% fall since the beginning of January the worst since then.

Even worse, the EV manufacturer's chances of an imminent turnaround are not looking promising.

Beginning in 2023, Tesla will aggressively lower the price of its vehicles in an attempt to increase demand. However, as a consequence, its previously enormous profit margins have been steadily declining. Pre-regulatory credits, Tesla's automotive gross margin for the third quarter dropped to 16.3% from 27.9% in the same period last year. And now that production employees at Tesla's US facilities are receiving salary raises, the pressure is only growing.

“We are going through a cyclical downturn for EVs, however competitive dynamics are exacerbating cyclical pressures,” Ivana Delevska, the head of investment management at Spear Invest, said in an interview. "These negative competition dynamics lead to price reductions and shrinking margins.”

The situation has become worse since Tesla has to reroute supplies meant for its Berlin factory and is pausing most production at its unit near Berlin from January 29 to February 11 due to Western military activities and security concerns in the Red Sea. To a person knowledgeable with the topic.

A rude shock for those who own Tesla

In its third-quarter earnings release for October, Tesla issued its first warning about the decline in demand for electric vehicles. Shortly thereafter, suppliers and automakers worldwide released their own pessimistic predictions. Numerous automakers changed their minds about growing.

Subsequently, Tesla revealed its fourth quarter delivery figures earlier this month. Although they exceeded analysts' expectations, the company's worldwide sales of electric cars were trailed by China's BYD Co.

As a consequence, Tesla investors are in for a harsh awakening. The stock performed as the eighth-best member of the S&P 500 last year. This year thus far, this is the sixth poorest performance.

Musk is obviously suffering greatly on a personal level. The Bloomberg Billionaires Index shows that the wealthiest man on the globe, who accumulated more fortune than anybody else in 2023, has witnessed a $23 billion fall in net worth so far this year. With $179 billion as of Friday's end compared to Musk's $206 billion, Jeff Bezos is rapidly catching up to Musk, who last year toppled Bernard Arnault to lead Bloomberg's wealth index.

Musk has over 304 million exercisable stock options and a 13% interest in Tesla, which account for the majority of his net worth. Approximately $42 billion is his stake in SpaceX, based on Bloomberg's wealth index.

Nevertheless, Tesla continues to be a significant participant in the worldwide shift away from gas-powered automobiles and toward mostly electric cars. Reason: It far outperforms all possible competitors. Although BYD of China has surpassed Tesla in terms of units sold, it continues to fall behind in terms of earnings and revenue. In the US, where Tesla continues to dominate the market, BYD does not sell automobiles.

The optimism that Tesla's previous achievements inspired may be its worst issue in many respects. Tesla's market valuation skyrocketed as investors increased the shares, surpassing that of any other automaker globally. But since the shares were perfectly valued, any bad news would cause them to respond strongly.

For this reason, a lot of people who favor Tesla contend that it is not comparable to other automakers. He believes that the company's true worth will be determined in the future, and he wants to create the first car that is fully autonomous. The only issue is that most experts believe the technology will not be available for years or perhaps decades, despite Tesla's years-long promises.

"It is already included in the valuation that Tesla will not be able to provide fully autonomous driving," declared Spears Delevska. "Will not be done. Only being another automotive manufacturer cuts it to a $750 billion valuation."