Tesla's Turbulent Times: Beyond the Headlines
Tesla's recent challenges run deeper than the public feud between Elon Musk and Donald Trump. The company's financial health is deteriorating, and it may be heading back to losses. This isn't just about Musk's political activities; there are significant underlying issues.
Political Fallout
Musk, once Trump's largest financial supporter, has since formed a new political party, displeased with Trump's recent tax and spending bill. This political turmoil has unnerved investors, causing Tesla's shares to plummet 6.8% on Monday. Analysts express concern that Musk's political engagements are diverting his attention from managing the company.
Dan Ives, an analyst from Wedbush Securities, suggests that Tesla's board should impose restrictions on Musk's political activities. He argues that the company is at a pivotal point in its growth, particularly with its autonomous and robotics future ahead. Despite this, Ives still advises purchasing Tesla stock, targeting a price of $500. However, analysts at William Blair have downgraded Tesla's stock to "market perform" and reduced their earnings projections.
Financial Impact of Trump's Bill
The recent political drama isn't Tesla's sole issue. Trump's new bill has revoked a $7,500 tax credit for electric vehicle purchasers and eliminated penalties for automakers failing to meet federal emissions standards. These penalties previously compelled gas-powered car companies to buy credits from EV manufacturers like Tesla. Without this income, Tesla might not have reported a profit until 2021, and it could be back in the red.
Robotaxi and AI Ambitions
Musk has been promoting Tesla's future in robots, artificial intelligence, and self-driving taxis. However, Tesla's taxi service is still limited, available only in Austin, Texas, for a select group of customers. It's not without its issues, as evidenced by a recent video showing a Tesla robotaxi driving on the wrong side of the road.
Meanwhile, Waymo, Google's self-driving car unit, is already offering robotaxi services in four cities and plans to expand to Miami and Washington, DC, next year. Investors are growing weary of the distractions and want Musk to focus on Tesla's business, particularly the robotaxi rollout.
Sales Decline
Tesla's sales are also a concern. Global sales dropped a record 13% in the first two quarters of this year, despite an overall increase in EV demand. This indicates Tesla's shrinking market share, partly due to heightened competition from other automakers. Chinese automaker BYD is even on track to surpass Tesla in global annual EV sales this year.
Demand is expected to weaken further when the $7,500 tax credit for electric car buyers expires in October. Tesla has also faced backlash due to Musk's political activity, impacting sales. Protests were held outside Tesla showrooms in the US, Canada, and Europe earlier this year. Musk appears to have alienated both sides of the political spectrum, which could continue to harm Tesla's sales.