Tesla stock is about to enter its worst year ever as Elon Musk’s electric car giant faces 4 major headwinds
Tesla (TSLA) has been a monster stock for most of its history, especially from its mid-2019 to late-2021 spike. But in 2022, Tesla stock has been losing heavily, on the upside. 52% slope as of Nov.
That number would easily surpass 2016’s 11% drop, the only other annual drop since Tesla stock went public in 2010. The sell-off intensified, prompting the giant. EVs have lost almost half their value in the past two months alone. On Monday, TSLA stock slid 6.8% to a new two-year low, the S&P 500’s worst performer of the session.
Here are some of the major headwinds TSLA stock faces, from Elon Musk’s “Twitter circus” to Tesla’s demand concerns.
Tesla stock year-over-year performance
|Five||Tesla stock change|
|two thousand and thirteen||343.8%|
|2022 at the beginning of the year||-52.3%|
China’s Covid concerns
Beijing is basically under lockdown amid the city’s first Covid death in months. Other restrictions were imposed in China on Tuesday as coronavirus cases rose to an official all-time high.
Stopping the more infectious omicron variants will be extremely difficult, as hundreds of millions of Chinese have not yet contracted Covid.
And that comes after China slightly eased restrictions, stoking hopes that the country would roll back its Covid-free policy.
The extended restrictions will further cripple China’s ailing economy, dampen demand for electric vehicles, including Tesla, and increase the risk of new production disruptions.
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China’s Covid crisis led to concerns about Tesla’s demand, in part due to a sharp increase in output in Shanghai. Tesla has slashed prices in China, but local media reports on further price cuts before year-end, but the waiting time is essentially zero. Tesla may be betting on a big quarter for European sales, but that could reduce the backlog of work in 2023.
On January 1, EV subsidies ended in China and Norway, with Germany significantly cutting subsidies. Sweden just ended EV subsidies while the UK ended the scheme. All of that could affect the demand and pricing of Tesla EVs in Europe and China.
That comes as China’s EV competition is intensifying, with more and more models from the likes of BYD (BYDDF), Nio (NIO), Automobiles (LIFE) and more taking on Tesla’s aging Model 3 and Model Y. Europe’s EV market is also becoming more crowded.
Tesla, on the other hand, will be eligible for new US tax credits of up to $7,500 per vehicle. Tesla still faces less competition in its home market than it does in Europe and China.
The Tesla Cybertruck is expected to begin production next year, with Musk expecting “early” production in mid-2023. But if the often-delayed Cybertruck stays on schedule, bulk deliveries could be may not begin until the end of the year or 2024.
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Elon Musk’s Twitter Dynasty
Tesla CEO Elon Musk has owned Twitter for less than four weeks, but it seems to have aged. He’s cut staff in half, with many other employees laid off. Over the weekend, Musk restored Donald Trump’s Twitter account, but then posted a vulgar meme aimed at the former president. Advertising revenue is plunging.
All of that has raised concerns that Musk is damaging his image. Even longtime TSLA bulls fear it could tarnish Tesla’s brand.
Musk could also sell more Tesla stock to pay the bills of Twitter. Musk has sold Tesla stock several times this year, citing Twitter as the reason for the most recent two tranches.
TSLA stock trails EV rivals, strong growth
Tesla stock is not doing well. But it’s not alone. Positive stocks have had a bad 2022. Tesla’s electric car rivals in particular have struggled, including Nio shares, Li Auto, Rivian (RIVN) and BYD. So by that measure, TSLA stock doesn’t look too bad throughout 2022. However, Nio, Li Auto, and BYD shares all rose in November, while Rivian fell slightly, while Tesla stock fell. 1/4 value value.
More broadly, bear markets have dominated most of the year. Although the major indexes have recovered from their October lows, they are still down significantly for the year, especially the Nasdaq.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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