Tesla shares are under pressure. Elon Musk is trying to allay concerns about demand and continues to propagate autonomous driving despite massive doubts.
Tesla boss Elon Musk used to complain about “production hell”, but today he seems to have arrived in “valuation hell”. This is the only way to explain why he, as co-founder, mastermind and main shareholder of the electric car group, claimed full-bodiedly in the context of the presentation of the business figures for the third quarter that his company was worth at least as much as the two most valuable public companies in the world together and why he flirted with share buybacks.
Tesla stocks also under pressure because of Musk?
Apparently he and the fellow shareholders, who were spoiled in the past during the stock market hype, have become nervous since the Tesla shares have lost around half of the market value they had once reached. The reason is not only the high rating compared to competing companies. Musk himself first threw his own shares worth more than $ 30 billion on the market at practically peak prices and then carelessly gotten so lost on Twitter that further transactions are obvious. For example, the issue of risky bonds in order to keep the price level high with the proceeds.
Not without reason. After all, the papers fell around five percent in after-hours trading on Wednesday, after the company had recorded record sales of $ 21.5 billion and a considerable announced quarterly earnings of $3.3 billion, but at the same time lowered the growth forecast for the year as a whole. “The strong dollar, high material and logistics costs and inefficiencies in ramping up the plants in Texas and near Berlin are to blame,” as the management announced. Even Elon Musk suddenly no longer wants to know anything about his forecast of increasing sales in the coming years by at least 50 percent compared to the previous period.
Is there a demand problem?
In the past few months, Tesla has tightened the price screw for vehicles and software in order to compensate for sales figures that tend to be disappointing in the final accounts. At the same time, the company is introducing organizational measures to declare a higher number of vehicles in a “transit phase”. This, together with decreasing waiting times when ordering new vehicles and in view of the economic turbulence, has led skeptical analysts to fear that the price level of the vehicles is too high and demand is falling.
While Musk confidently declared on Wednesday, as always, “we will sell every car that we produce in the next few years,” experts in China identify certain sensitivities. In the US, they fear the consequences of rising financing costs. In July, the entrepreneur himself admitted that vehicle prices were at an “embarrassing level” and that he hoped to be able to lower them in the future. “You can’t just raise prices to an arbitrarily high level because you break affordability and then demand falls off a cliff.”
Most likely, however, he is speculating on America’s generous Democrats, who, led by President Joe Bidens, have decided on new tax credits of up to $40,000 for commercial electric vehicles from 2023. This move also opens the door for consumers to once again claim a $7,500 tax break when purchasing Tesla vehicles. Teslas had qualified for such credits early on, before the company hit a sales cap.
“Between logistical problems in China, supply chain problems, tremendous difficulties with self-driving vehicle (FSD) software, the Musk Twitter fiasco, and with increasing competition between electric car suppliers across the board, the pressure on Musk & Co. is mounting prove,” argue experts such as Dan Ives of Wedbush Securities. They point to the increasing competition from Detroit, Europe and above all from Asia. In fact, more and more vehicle models are coming onto the market from there that can keep up with Tesla in terms of design, build quality, technology, price and service. BYD, for example, is now one of the largest suppliers of electric cars worldwide, while others are catching up.
Autonomous driving is a long time coming
Tesla’s value is questioned not only because of the increasing competition, but also because of unresolved technical and regulatory issues with the so-called FSD mode – i.e. using the vehicles as self-driving units. This ability would revolutionize the entire transportation industry and provide the providers of the corresponding vehicles and services with unimagined growth and revenue opportunities. The associated imagination has repeatedly served as an explanation for the fact that Tesla could be about four times as valuable as the Japanese Toyota group or nine times as much as VW.
There’s just one catch: it may be a long time before things really get that far. For a good ten years, eye-catching demo vehicles from companies such as Google, GM, Ford, Tesla, Mobileye and Amazon’s Zoox have been trying to prove that they can find their way independently in chaotic urban areas or on freeways without human intervention or having to monitor them. Developers have long claimed they are on the verge of dramatically reducing road deaths, eliminating congestion and parking spaces—and turning the $2 trillion global automotive industry upside down.
It all sounds great until you encounter an actual robo-taxi in the wild – and that’s pretty rare. Six years after the first journeys in “autonomous cars” and almost 20 years after the first attempts, there are only a few vehicles of this type on the roads. And if they do, they’re to be found somewhere in the sunbelt, because they still can’t cope with weather conditions harder than “partly cloudy.” They don’t know how to deal with construction sites, animals, traffic cones and zebra crossings, let alone turning left.
There’s long been an entire social media genre devoted to self-driving cars that are hopelessly confused. If the topic were less serious, the posts could even be funny. In a video, for example, a Waymo car so confused by a traffic conethat it drives away from the technician assigned to rescue it. In another, a whole fleet dives modified Chevrolet Bolts at a San Francisco intersection, blocking traffic. In a third scene, a car drives in Tesla at very low speed directly into the tail of a private jet. The vehicles don’t seem to be able to do more, although according to McKinsey estimates the industry has so far sunk about 100 billion dollars in the development of the technology.
The industry’s notorious optimism borders on fraud, skeptical insiders complain and fear that we may have to wait decades or an eternity for the technology to be reliable. Even some of the most ardent advocates have defected. Anthony Levandowski For example, the engineer who pioneered the research into autonomous driving and was considered the biggest star in the field for more than a decade. Now he leads a startup company that develops autonomous trucks for clear industrial facilities. Driverless vehicles could not handle more in the foreseeable future.
Elon Musk is unlikely to like this assessment, and certainly not Tesla speculators such as Cathie Wood. Finally, she ultimately questions the high valuation of the company.