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Tesla Faces $94 Billion Market Value Loss · Elon Musk Podcast

• 0:01
  Hey everybody, welcome back to the Elon Musk Podcast.
• 0:05
  This is a show where we discuss the critical Crossroads, The
• 0:08
  Shape, SpaceX, Tesla X, The Boring Company, and Neuralink,
• 0:13
  and I'm your host, Will Walden. If you want uninterrupted
• 0:17
  episodes of the Elon Musk podcast, please go to
• 0:20
  clubelon.supercast.com to find out how there's a link in the
• 0:26
  show notes. Tesla Inc has witnessed a sharp
• 0:29
  decline in market value, losing over $94 billion in the early
• 0:34
  weeks of 2024. Now this downturn marks a stark
• 0:37
  contrast to the company's success in 2023, where its stock
• 0:41
  value more than doubled. Now the slump is attributed to a
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  series of adverse developments, including reduced demand for E
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  VS in the United States, price cuts in China, and increasing
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  labor costs. Now the electric vehicle
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  industry is currently experiencing A slowdown
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  altogether, particularly in the US market.
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  Investors main concern on Tesla is stagnating growth, said
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  Jeffrey Osborne, an analyst from Cohen, highlighting concerns
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  about Tesla's performance, especially in light of the price
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  reductions in the competitive Chinese market.
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  Now, these factors have fueled investor apprehension,
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  contributing to the company's recent financial setbacks.
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  Tesla's recent market capitalization loss is
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  unprecedented since its public debut in 2010.
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  The company's stock has plunged by 12% since January 2024, the
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  most significant drop since a 14% decline over the first nine
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  trading days of 2016. The outlook for a rapid recovery
• 1:38
  seems bleak given the current market conditions, and the
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  company has been aggressively cutting prices since early of
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  2023 to stimulate demand. But this strategy has led to a
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  substantial erosion of profit margins.
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  The third quarter of the previous year saw Tesla's
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  automotive gross margin excluded regulatory credits fall to 16.3%
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  from 27.9% a year earlier. And additionally, Tesla is
• 2:03
  facing increased financial pressure due to pay raises for
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  production workers at its US plants.
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  We are going through a cyclical downturn for E VS, but
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  competitive dynamics are exacerbating the cyclical
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  pressures, said Ivana de Leskva, senior chief investment officer
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  at Spear Invest. She noted that the combination
• 2:24
  of price cuts and shrinking margins are consequences of
• 2:27
  these challenging market conditions.
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  Now adding to Tesla's challenges.
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  The company has had to redirect shipments intended for its
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  Berlin plant and suspend most production there from January
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  29th to February 11th due to security concerns and Western
• 2:42
  military actions in the Red Sea. This disruption further
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  complicates the company's operational landscape.
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  Tesla first raised alarms about slow EV demand during its third
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  quarter earnings report in October.
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  Following this, several automakers and suppliers
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  worldwide expressed similar concerns, leading to a scaling
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  back of expansion plans across the industry in recent
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  development. Tesla's fourth quarter delivery
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  numbers, though better than expected, positioned the company
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  behind China's BYD company in global electric car sales.
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  This shift has been a wake up call for investors, particularly
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  after Tesla's stock was among the top performance in the S&P
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  500 last year. Tesla CEO Elon Musk, the world's
• 3:25
  richest person as of last year, has seen a significant decrease
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  in his net worth by $23 billion in the early part of 2024.
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  His wealth, primarily derived from his stakes and Tesla and
• 3:36
  SpaceX, has been affected by the recent downturn in Tesla's
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  market value. And despite these setbacks,
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  Tesla remains A crucial player in the global shift towards
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  electric vehicles. While China's BYD has surpassed
• 3:48
  Tesla unit sales, Tesla still leads in revenue and profits,
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  particularly in the US market. However, Tesla's past success
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  and inflated market capitalization have made its
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  stock particularly sensitive to negative news.
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  A major point of contention of Tesla is its unfulfilled promise
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  to fully autonomous driving and AI advancements.
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  Being simply another automotive manufacturer is not going to cut
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  it for a $750 billion valuation, said to Levska, emphasizing that
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  Tesla's high valuation hinges on these future technologies and
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  the company's failure to deliver on them.
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  Thus far, in response to industry trends, Tesla has
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  announced pay increases for workers at its US factories.
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  This move follows similar actions by non union automakers
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  like Toyota, Volkswagen and Hyundai coming in the wake of
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  historic labor contracts securing the United Auto Workers
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  or UAW for employees at Ford, General Motors and Solantis.
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  Now the pay raises at Tesla, which were not detailed in terms
• 4:51
  of amounts, apply to all US production associates, material
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  handlers and quality inspectors. This decision aligns with
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  broader industry trends where automakers are increasing wages
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  to remain competitive and respond to unitization efforts.
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  So Tesla's not doing anything really out of the ordinary here.
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  UAW President Sean Fain has identified Tesla as a key target
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  in the union's expansion efforts following successful wage
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  negotiations with the Big Three automakers.
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  And Fain attributed past unization failures to internal
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  corruption and unfavorable contracts, but remains
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  optimistic about UA WS future prospects.
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  Elon Musk, Tesla CEO, has historically been critical of
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  unions. He's emphasized cost cutting
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  measures in response to economic pressures and the need to make
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  Tesla's electric vehicles more affordable.
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  The increased wages for production workers, however, may
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  complicate these cost reduction efforts.
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  Tesla's Fremont factory, which employs over 20,000 workers, has
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  seen the formation of a UAW organizing committee.
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  The National Labor Relations Board previously ruled that
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  Tesla violated labor laws during past unionization efforts.
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  Tesla denies these allegation and is appealing the ruling in
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  federal court. The pay increases at Tesla's US
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  plans reflect A broader industry trend, though.
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  Following the UAW successful strikes against the Big Three
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  automakers. Other major car companies
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  including Hyundai, Honda, and Toyota have also raised wages at
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  their US factories in response to the unions.
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  Now, the wage hikes at Tesla and other automakers show a
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  significant shift in the automotive industry's labor
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  dynamics. While these increases are a step
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  toward addressing worker demands, they also reflect the
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  changing economic landscape and the growing influence of Labor
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  unions like the UAW. Now, Tesla's substantial market
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  value loss marks a challenging start to 2024, contrasting
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  sharply with its previous year's huge success.
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  And the company faces multiple hurdles, including slowing EV
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  demand, competitive market dynamics and increased labor
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  costs. And despite these challenges,
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  Tesla is the juggernaut in the EV industry.
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  And now it's under new pressures.
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  And the recent wage increases across the industry, including
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  at Tesla, could mean a significant shift in Tesla's
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  business. Hey, thank you so much for
• 7:08
  listening today. I really do appreciate your
• 7:11
  support. If you could take a second and
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  hit the subscribe or the follow button on whatever podcast
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  appreciate it. It helps out the show
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  tremendously and you'll never miss an episode.
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  And each episode is about 10 minutes or less to get you
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  caught up quickly. And please, if you want to
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  support the show even more, go to patreon.com/stage Zero and
• 7:35
  please take care of yourselves and each other and I'll see you
• 7:37
  tomorrow.