The market value has shrunk by $840 billion, and Musk's Tesla is "unmanned"?

National Business Daily

2024-04-24 19:27Published on the official account of Sichuan Daily Economic News

Reporter: Cai Ding, Li Xing

Nico Murillo wears a badge and tries to enter the Tesla factory where he works. However, the factory security guard took the badge and told Murillo that he had been fired. This scene took place on April 15, 2024, and the harsh reality was a little hard for Murillo, who has been a production supervisor at Tesla for nearly 5 years, to accept.

"In 2023, I used to sleep in the car in the parking lot on weekdays, take a shower at the factory, and microwave dinner in the lounge to avoid commuting time. In a post reminiscing about his layoff, Murillo recounted the sacrifices he had made, and he couldn't hide his frustration.

Image source: LinkedIn screenshot

In fact, Murillo is just a microcosm of Tesla's recent largest-ever layoffs. Right now, Tesla is facing a growth dilemma. According to the latest financial report, Tesla's revenue in the first quarter of 2024 fell 9% year-on-year to $21.3 billion, the largest year-on-year decline since 2012.

Now Tesla is looking to more affordable models, a fully self-driving system (FSD), and a robotaxis to get out of the slump.

Wind data shows that as of the close of trading on April 23, Tesla's market value has fallen from a high of $1.3 trillion in November 2021 to $460.8 billion, a decrease of about $840 billion, and the shrinkage alone is far higher than the current market value of "TSMC" ($692 billion). The sell-off by institutional investors makes people feel that Musk's "Tesla" stock seems to have entered an "unmanned" state.

01 Adversity: The "largest layoff in history" began, and the market value evaporated nearly $840 billion from the highest point

Tesla has long been regarded as a benchmark company for electric vehicles, however, after a wave of rapid growth, the "tech upstart" that once made Wall Street coveted is now offering the "killer feature" of layoffs.

In mid-April, Tesla announced that it would lay off more than 10% of its global workforce, meaning more than 14,000 people would be laid off. This decision was called "the largest layoff in Tesla's history" by the media.

The reality behind the layoffs is that Tesla is standing on the edge of a cliff.

According to the financial report released in the early morning of April 23, Beijing time, due to the slowdown in global demand for electric vehicles, Tesla's revenue in the first quarter of 2024 fell by 9% year-on-year to $21.3 billion, less than the market expectation of $22.3 billion, which is not only the first year-on-year decline in nearly four years, but also the largest decline since 2012. On a month-on-month basis, the decline was more than 15%. In addition, the operating margin in the first quarter of 2024 also fell sharply to 5.5% from 19.2% two years ago.

Image source: Illustration

Data released earlier this month also showed that Tesla's global car deliveries in the first quarter of this year fell year-on-year for the first time in nearly four years as price cuts failed to stimulate demand.

Tesla's global deliveries in Q1 2024 fell below 400,000 units Image source: per map

In the capital market, Tesla's performance is also "falling endlessly", far worse than that of established automakers such as Toyota and General Motors.

In November 2021, Tesla hit a peak market capitalization of $1.3 trillion, leading the entire electric vehicle market. As of the close of trading on April 23, Tesla's market value has fallen to $460.8 billion, evaporating nearly $840 billion from the all-time high of $1.3 trillion, a cumulative decline of nearly 65%. Since the beginning of the year, among the "Big Seven" of U.S. stocks, only Tesla and Apple have shown a downward trend, with Tesla's stock price falling 41.79%, more than three times Apple's decline (10.14%), and its market value has evaporated nearly $330.6 billion.

Image source: Google Finance

02 In Europe and the United States: Slowing demand and weakening consumer interest

Tesla's crisis is not isolated. Behind its growth woes is also the downturn in the U.S. EV market as a whole.

In the first quarter of this year, U.S. electric vehicle sales were close to 269,000 units, up 2.6% year-on-year and down 7.3% quarter-on-quarter. According to S&P Global Automotive, the number of electric vehicle registrations in the U.S. increased by 15% year-on-year in January, compared with a 52% year-over-year increase in January 2023.

At the beginning of this year, the Chicago area of the United States experienced record low temperatures, with temperatures plummeting to minus double digits. Under the influence of extreme cold waves, dozens of Tesla electric vehicles were abandoned at public charging stations because they could not be charged, like a "cemetery". One owner said, "Here's a bunch of dead robots. ”

Poor performance in extreme environments is also influencing consumer interest in electric vehicles. According to J.D. Power's 2024 U.S. Electric Vehicle Experience (EVX) Owners Study, the percentage of consumers who said they were likely to consider buying or leasing an electric vehicle fell to 24.4% at the end of February 2024, declining for the fourth consecutive month, and the percentage of consumers who said they were unlikely to consider buying an electric vehicle rose to 22.2%.

J.D. Power said the situation in Chicago at the beginning of the year showed that electric vehicles are slow to charge in cold weather, which may have exacerbated that concern.

Sam Fiorani, vice president of global automotive forecasting at AutoForecast Solutions, pointed out in an interview with reporters, "The global market acceptance of electric vehicles has been wave-like. The first wave includes the 'tech elite' and influencers, as well as the people who are driving the world's transition to renewable energy. After satisfying the needs of this group of people, it is difficult to shift the focus of electric vehicle promotion to ordinary people, because this group is cautious about change. ”

The New York Times reported that analysts believe that weak EV sales in the U.S. are due to inadequate charging infrastructure and a lack of affordable product options, and, strategically, the U.S. does not see EVs as part of a sustainable transportation plan.

In addition to the United States, demand for electric vehicles in Europe is also slowing. Germany, for example, saw a 29% drop in electric vehicle sales in March, the biggest drop in more than a decade.

Gong Huiwei, research director of Gartner, an American information technology research and consulting company, pointed out in an interview with reporters, "Judging from the recent market environment, there are various reasons why the developed automobile market is not 'cold' for electric vehicles, and Tesla should be most affected by the West's lack of 'cold'." ”

Under the downturn of the entire industry, since last year, many traditional car companies in Europe and the United States have begun to reconsider their electrification strategies.

Image source: Illustration

Sam Fiorani told reporters: "To attract more buyers to the market, it is necessary to improve public charging infrastructure, increase education about the benefits of electric vehicles and lower product pricing." Until there are more advances in batteries, charging, or other technologies, I think the current slowdown in the EV market will continue, possibly for two to three years. ”

However, Gong Huiwei also said, "Tesla, as the 'Apple' in the global electric vehicle field, has very high market expectations." Tesla delivered more than 1.8 million electric vehicles worldwide in 2023, and the current delivery growth expectations are still in place, including expectations for its technology, 'three electrics' (power battery cells, motors, and electronic controls), intelligent driving, and market share. ”

03 In China: Fierce competitors are around, and the price war is heating up

For Tesla, it is not only the sluggish demand in the local market in the United States that is worrying, but also the "comprehensive encirclement" trend of local car companies in China may be more worrying.

There is a view that Tesla's decline in global deliveries in the first quarter of this year is partly related to its poor performance in the Chinese market in the same period. Data shows that in January ~ March this year, Tesla's retail sales in China totaled about 132,000 units, a year-on-year decrease of 3.6%. Among them, retail sales in March were about 62,400 units, a year-on-year decrease of 18.61%. However, Cui Dongshu, secretary general of the National Passenger Car Market Information Association, said in an interview with reporters, "Tesla's production capacity in China has reached its peak, sales are fluctuating, and it is prone to negative growth." ”

In the eyes of the outside world, Tesla's sales in China have fallen sharply, mainly due to the squeeze of more and more mid-to-high-end electric models of the same level after entering the market. Cui Dongshu also admitted that Tesla's decline in sales in China is partly due to the impact of the launch of Xiaomi SU7.

In addition to Xiaomi SU7, in the market segment within the price range of 200,000 ~ 300,000 yuan, Tesla's main model Model 3 will also compete with Zeekrypton 007, New Zeekrypton 001, Interstellar Yuan ES, Weilai ET5, Xiaopeng P7i, BYD Han, Xiaopeng P7, Zhijie S7, etc.

Image source: Per Meridian (data as of April 24, 2024)

At the same time, more and more domestic brands are starting to launch models that benchmark the Model Y. In addition to the Xpeng G6 that has already been launched, DENZA Auto has also launched the all-new Denza N7, a competitor to the Model Y, at a lower price. In addition, the first model of NIO's new sub-brand Ledao, the Ledao L60, is also directly benchmarked against the Model Y, and the cost is about 10% lower than that of the Model Y, and will be released in the third quarter of this year and large-scale deliveries will begin in the fourth quarter.

"In the first quarter of this year, the sales of major electric vehicle companies also declined, which to some extent means that Tesla's troubles have just begun, because in addition to developed markets, the competition in emerging markets is becoming increasingly fierce, and the strong rise of Chinese electric vehicle companies, including the entry of high-tech companies such as Huawei and Xiaomi, has added uncertainty to the already very 'volume' electric vehicle competition. Price reductions and dilution of the market share of the leaders are inevitable. Gong Huiwei pointed out to reporters.

Under such circumstances, less than a month after the official announcement of the price increase, Tesla reduced the price of the Model 3, Model Y, Model S, and Model X by 14,000 yuan. After the price reduction, the price difference between the Model 3 and the Xiaomi SU7 has narrowed to 16,000 yuan, while the price difference between the Model Y and the all-new Denza N7 is less than 10,000 yuan.

Image source: Illustration

As for whether Tesla will further reduce prices to maintain sales, Sam Fiorani pointed out to reporters, "It is not impossible for Tesla to further reduce prices, but each price adjustment is to balance the supply and demand relationship in the market at that time." Tesla and other EV makers have already set a level for their EV supply, and now they need to find the right price to attract more buyers to the market. ”

04 Musk's "super bet"

In the face of many challenges, Tesla has focused its "breakout" strategy on more affordable and affordable models, FSD, and Robotaxi with FSD capabilities.

After the release of the latest quarterly report, Musk said in an analyst conference call that Tesla's lower-priced models will start production in early 2025, if not later this year. As soon as the news was announced, Tesla's stock price rose more than 10% after hours.

Musk acknowledged that demand for electric vehicles is under pressure and that other automakers are switching to hybrid vehicles, but Tesla will not do so. He noted that the launch of Tesla's new models is accelerating, including a cheaper car. The vehicles will use existing and new platforms and will be produced on the company's existing production lines.

A few days earlier, Tesla had slashed the price of its FSD software in the United States from $12,000 to $8,000, and the monthly subscription fee had also been reduced to $99 from $199. In the absence of new models in the short term, the continuously updated FSD will become a "sharp weapon" for Tesla to conquer the global market.

Image source: Tesla's official website

Regarding FSD's revenue-generating ability, a report by Goldman Sachs analyst Mark Delaney's team in November last year said that although FSD is still in the testing stage, its annual revenue has reached $1 billion ~ $3 billion.

On the positive side, the team believes that with the growth of Tesla's electric vehicles worldwide, "we believe that Tesla's software-related revenue will reach tens of billions of dollars annually by 2030 (mainly from FSD)." ”

Despite the report's optimistic revenue forecast, FSD still has a long way to go before it can be commercialized on a large scale. Experts on self-driving cars and regulation say it could be years before Tesla releases a fully autonomous vehicle with regulatory approval.

"Driver assistance systems such as FSD work very well in limited situations, but they also have drawbacks, requiring driver intervention when the system is chaotic. In addition, the technical and regulatory dimensions have not yet advanced to the level where autonomous vehicles are safer and more reliable than human drivers. I don't think commercial self-driving cars will be around until sometime in 2030 or even later. Sam Fiorani told reporters.

As another "sharp weapon" planned by Tesla, Robotaxi is planned to be launched in August this year. However, Fiorani pointed out to reporters that Robotaxi is not expected to be available for a while.

"Tesla has always announced new products and then spent years bringing them to market. It will take time to improve the battery or the FSD software, and if Robotaxi is really a fully self-driving car, as Musk said, I don't think it will be possible at least next year. Still, the promise of having the technology needed to produce self-driving cars could excite investors for a few more years. He explained.

"The specific implementation and penetration rate of autonomous driving have a lot to do with government regulation. Gong Huiwei summed up to reporters. "Musk's depiction of electric vehicle technology disrupting traditional cars has already been achieved to some extent, but in a way this is just the beginning. And traditional giants such as Toyota, Volkswagen, General Motors, and Ford will certainly try to delay the adoption of electric vehicles in order to buy time for product innovation. Therefore, Musk's recent measures such as 10% global layoffs in the face of the decline in the stock market and the harsh competition in the market are really helpless. ”

Planning|Xiao Yong, Sun Yuting

Reporter|Cai Ding, Li Xing

Editor|Lan Suying

Co-ordinating editor|Yi Qijiang

Vision|Liu Yang

Video: Wang Tianrui

Typesetting|Lan Suying

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