Electric vehicle maker Tesla shares tumbled over 12% on Thursday, wiping over $80 billion off the company’s valuation. The selloff was the biggest for the stock since September 2020. It stoked investor concerns about soft demand for the car maker’s expensive models and stiff competition from Chinese rivals who are more adept at cost management and have a broader range of lower-priced vehicles.
During the company’s earnings call on Wednesday, CEO Elon Musk said sales growth would slow this year despite price cuts that have already hurt margins at the world’s most valuable automaker. He also warned investors that he may seek to take the company private at some point and that the firm is not profitable. “We’ve gotten to the point that we are burning cash, and it would be awful for us if we did not do something soon,” he told analysts.
Musk told investors that orders for the company’s cars were more than production and hoped to keep cutting prices until he could make enough vehicles to meet demand. He also said he was concerned about rising interest rates, which would drive up financing costs and reduce vehicle demand.
The CEO vowed to continue working on the next-generation EV, a cheaper model that can compete with the cheapest offerings from Chinese car makers. He said the vehicle will begin production at a new Texas factory in the second half of 2025. The company will then expand production to other plants, including one in Mexico and another outside North America.
Tesla’s lofty valuation is primarily driven by the car maker’s vital growth targets, soaring profit margins, and plans for self-driving and artificial intelligence software that could transform how people travel. But investors are also wary of the risks involved in such investments, notably as many big automakers have jumped into the EV space with cheaper and more mainstream vehicles.
The stock was already down more than a third this year after the company missed revenue and earnings estimates in the fourth quarter. Its forecast for 2024 was also below expectations. The combination of weak predicted sales, Musk’s comments about China, and concerns that the Federal Reserve might raise interest rates this year took a bite out of the company’s market value. Shares of EV startups and automakers such as Ford fell as well. (Reporting by John Olmstead; Editing by Mark Potter)
