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Elon Musk and Tesla Are Having a Bad Month

TheStreet 3/9/2023 Luc Olinga
© Provided by TheStreet

After an impressive start to the year, the electric-vehicle manufacturer is having a difficult March.


In the world of Tesla and its whimsical and charismatic chief executive, Elon Musk, everything moves fast. 

Watching the company and its CEO is like having a remote and switching from one channel to another. The program on one channel is quickly forgotten as soon as the next one comes up.

The electric-vehicle market leader started the year with a bang, on Jan. 12 launching a price war in the automotive sector by slashing its car prices. 

While the goal clearly was to ensure that the variants of its two popular models, the Model 3 sedan and the Model 3 SUV, were eligible for the federal tax credit of $7,500, the company also wanted to stimulate demand and challenge rivals to make similar moves. 

Tesla's Two-Month Rebound

The move was successful on all counts, as Musk on Jan. 25 indicated that demand for Tesla  (TSLA) - Get Free Report cars was at an all-time high. Except for Ford  (F) - Get Free Report and Chinese EV upstarts, few competitors have been able to fight back by lowering prices. And the move by Tesla and Musk has particularly caused a demand problem for its young rivals, Lucid  (LCID) - Get Free Report and Rivian  (RIVN) - Get Free Report.

Then, on Jan. 25, Tesla smashed earnings and revenue expectations for the fourth quarter of 2022 and the full year. The Austin company also said that it would produce 1.8 million vehicles this year, 31% more than the 1.37 million units it turned out last year. Musk went so far as to tell analysts the figure could reach 2 million vehicles. 

As a result, the stock strongly rebounded: It gained 67% in January and February combined, rising to $205.71 on Feb. 28 from $123.18 on Dec. 30. Investors were convinced that Tesla had now dug itself a moat against its rivals, which had started to take market share from it.

But on March 1 this momentum seems to have stopped. On that day, Musk and Tesla held an Investor Day. The best one can say for this event is that it did not go over well with the markets. Tesla's shares are down 11.5% in the six trading sessions that followed.

Musk No Longer World's Richest Man

The automaker's poor start in March is also translating into a drop in Musk's wealth. The billionaire, whose fortune is largely linked to his Tesla shares, had once again become the world's richest man, following Tesla's stock-market rebound on Feb. 27. 

But he again lost this title and is behind the French executive Bernard Arnault. Musk's net worth is valued at $170 billion as of March 8, according to the Bloomberg Billionaires Index. Arnault, CEO of the luxury-goods group LVMH  (LVMUY) , is worth $187 billion.

Investors had high hopes for Tesla's Investor Day. They'd hoped that Tesla and Musk would unveil a low-cost -- $25,000 -- vehicle to conquer emerging markets and the 80% of American consumers who are interested in the brand but can't afford its vehicles. 

The Model 2, as analysts call it, is also seen as potentially enabling Tesla to reach its goal of producing 20 million vehicles a year by 2030. 

But Tesla and Musk haven't disclosed their plans. They indicated that they had developed a new vehicle-manufacturing platform that would reduce costs by around 50%. But they'd said nothing about the first vehicle that would be developed on this "next-gen vehicle platform."

Nor did they reveal any new products, preferring to explain what the company does and its vision in contributing to a sustainable energy economy.

"We're trying to convey a message of hope and optimism and optimism that is based on on actual physics and real calculations," Musk said during the event. "Not it's not wishful thinking. Earth can and will move to a sustainable energy economy and will do so in your lifetime."

The billionaire also said nothing about the Cybertruck, Tesla's first pickup truck. This vehicle is highly anticipated as it is projected to be the company's new cash machine. Investors were hoping that the techno king, as he's known within Tesla, would showcase the version of the Cybertruck that will go into production later this year.

Furthermore, since the Investor Day, the Model Y, Tesla's best-selling vehicle of 2022, has been the focus of a new investigation by federal regulators, after incidents of the steering wheel coming off while driving were reported. Two instances were reported to the National Highway Traffic Safety Administration.

No crashes or injuries were related to this defect.


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