Less than two weeks after 2023, Tesla and Apple, the two most talked about technology giants in the US stocks, have made big moves. Tesla has slashed prices around the world in response to possible sluggish demand for electric vehicles; Apple CEO Tim Cook also agreed to accept as many as a 40 percent pay cut.
Tesla started a global price war
After failing to meet Wall Street delivery expectations last year, Tesla has cut the price of electric vehicles in various markets such as Asia, North America, Europe and the Middle East in the past two weeks, with prices falling by as much as 20%. Tesla hopes to stimulate electric vehicle consumption in the global market and challenge competitors with this move.
Dan Ives, an analyst at brokerage Wadebush, expects Tesla's price-cutting strategy could increase global deliveries by 12 to 15 percent this year.
While boosting sales, the price war also means that Tesla's profits will be affected. Musk has previously warned that the prospect of recession and higher interest rates mean Tesla may lower the price of electric vehicles at the expense of profits to maintain sales growth.
Tesla's price cuts also triggered shocks in the market. On January 13, Tesla's intraday stock price fell more than 5%, but the closing decline narrowed to less than 1%. Tesla shares have fallen about 24 percent in the past month.
Musk acknowledged last year that the price of Tesla's electric cars was "embarrassingly high" and could hurt demand. The latest round of price cuts that swept the world also marks that the supply and demand relationship of electric vehicles is undergoing an essential reversal. For much of 2021 and 2022, Tesla's new car orders outstripped supply, but that trend began to shift in the second half of last year. Tesla delivered less than production in the third and fourth quarters.
Throughout 2022, Tesla missed its target of a 50 percent increase in deliveries, and sales of Tesla's Chinese-made vehicles hit a five-month low in December, underscoring the blow of rising interest rates and heightened recession fears.
According to Tesla's previous pricing strategy, price is determined by cost. However, in the new round of price cuts, Tesla did not specify which costs have decreased.
Of all Tesla's markets, China and the United States saw the most significant price reductions for electric vehicles. Model 3 and Model Y price cuts in the U.S. ranged from 6 percent to 20 percent, and Tesla also lowered prices for luxury models in the U.S. Model X and Model S.
In China, Tesla Model 3 and Model Y prices are down 13% to 24% from last September. In 2021, the United States and China together accounted for about 75% of Tesla's sales, but have been growing in Europe.
In this round of price reductions, Tesla also lowered the prices of electric vehicles in Germany, France, Switzerland and Austria. In Germany, the price of the Model 3 and Model Y fell by as much as 17%.
Tesla also reduced the price of Model 3 and Model Y electric vehicles in Japan and South Korea by about 10%, which is also the first time since 2021 that Tesla has cut prices in major Asian markets outside China.
Tesla's price cuts are also putting pressure on competitors. On January 13, in the European market, the shares of Stellantis, Volkswagen and Renault fell by 2.2% to 3.8% intraday; U.S. automakers General Motors and Ford also fell more than 6 percent each in early trading.
Cook agrees to a 40% pay cut
The economic downturn has not only affected sales of electric vehicles, but also caused concern about shipments of the highest-end smartphone Apple iPhone this year.
After Apple's share price fell by nearly a third last year, Apple said in a recent filing with the U.S. Securities and Exchange Commission that Apple's CEO Tim Cook's total compensation in 2023 will be reduced to $49 million, which is equivalent to 60% of Cook's 2022 compensation target.
In 2022, Cook received nearly $83 million in stock awards, $12 million in bonuses, and $3 million in salary. He also received benefits such as retirement plan contributions, security and personal air travel and more than $46,000 in holiday cash expenditures.
Apple's compensation committee said the change was made in response to last year's pay vote. Only 64 percent of shareholders approved of Cook's compensation, down from 95 percent in fiscal 2020. Apple's filing also alleges that after shareholders voted on Cook's compensation package, Cook himself demanded changes. After news of Cook's salary cut, Apple's stock price rose more than 1% on January 13.
Recently, institutional shareholders have been under increasing pressure on executive compensation. To that end, Apple reached out to institutional shareholders to find out what they thought about Cook's compensation. "Based on these important conversations, we have adjusted the size and structure of Cook's compensation for 2023." Apple's compensation committee wrote.
Apple said Apple stock has returned 1212 percent since Cook took over as CEO in 2011, compared with 290 percent for the S&P 500 over the same period.
Based on Apple's September 2020 share price, Cook's stock acquired since 2011 is worth more than $900 million. According to Forbes, as of now, Cook's personal net worth is about $1.7 billion.
In August 2020, Apple's market capitalization exceeded $2 trillion for the first time. As the pandemic boosted the demand for remote work and smart electronics, Apple's market capitalization briefly topped $3 trillion in January 2022.
However, since the past year, due to the impact of the epidemic on the supply chain and the weak global economic recovery, Apple's shipments have also encountered challenges. Investors are also worried about rising interest rates and falling consumer confidence, which could hurt demand for Apple's high-priced products.
A new report by supply chain analyst Trendforce estimated that Apple's iPhone shipments fell 22% in the fourth quarter ending December.
Jerome Ramel, an analyst at Exane BNP Paribas, the securities arm of ABC, lowered Apple's iPhone shipment target for fiscal 2023 from 245 million to 224 million in a report released last week, arguing that Foxconn's supply chain problems and consumer spending on high-end mobile phones will affect Apple's iPhone shipments.
According to data from research agency Refinitiv, analysts on average expect Apple's revenue to fall 1% year-on-year in the fourth quarter of last year, the first quarterly revenue decline since the first quarter of 2019, due to concerns about consumer demand.