Tesla’s Musk throws down the gauntlet

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Tesla shares rose more than three percent in after-market trades following the post, after finishing the day down. (AFP)
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  • Tesla has lost over US$90 billion in market cap, a rough landing in 2024, and a continuation of a slide that could crash the EV maker’s stock value, data from Refinitiv revealed.
  • There is declining growth in EV production and a wider slowdown in the market that has Tesla investors nervous.

Dubai, UAE — It has been a tumultuous time at Tesla lately, and Musk in particular has been at the center of controversy, following a daring report by The Wall Street Journal about his alleged drug use, including ketamine, LSD, cocaine, MDMA, and mushrooms. NASA investigated and said it isn’t aware of drug use at Elon Musk’s SpaceX, Bloomberg reported.

So now, Musk is at it again or maybe his genius mind is. He covets more control over Telsa’s decision-making as if he didn’t already have it. Technically, having only about a 13 percent share in the EV maker, he doesn’t. Practically, he does, having assembled a core shareholders board who are close buddies, including a former Tesla founder and his brother Kimbal.

This is most likely a media stunt and a Wall Street firestorm trying to somewhat divert attention from or reverse the misfortunes of Tesla lately.

Power grab

In a post on his social media X, Musk said, “I am uncomfortable growing Tesla to be a leader in AI & robotics without having 25% voting control. Enough to be influential, but not so much that I can’t be overturned.” Otherwise, he said, “I would prefer to build products outside of Tesla.”

The comment comes as the company experienced a volatile 2023, when it cut the average price of its models by around 25 percent and dropped to second place behind China’s BYD, the new world’s top EV seller.

There is declining growth in EV production and a wider slowdown in the market that has Tesla investors nervous.

Business Insider reported that Tesla would delay a planned factory in Mexico. It added that US car manufacturer Ford delayed $12 billion of its planned $50 billion investment in EV manufacturing capacity, while GM also stalled production of key EV models and scrapped a $5 billion partnership with Honda to make cheaper EVs.

Tesla accounted for 56 percent of all US BEV sales in Q4 2023. 

Hertz recently announced it was selling 20,000 electric cars out of its fleet, and replacing them with gasoline vehicles. More on that later.

Musk is demanding more shares, knowing that he once held over 20 percent of Tesla shares but had to sell around 7 percent of them to help finance his purchase of then Twitter.  

It looks almost certain that he will get his wish, though it is not clear how he will fund it. Tesla’s board is mostly comprised of Musk friends, supporters and business allies, including JB Straubel- Tesla Co-founder and Chief Technology Officer from 2005- 2019. James Murdoch, the son of Rupert Murdoch, has traveled with Musk’s family and attended Musk’s sibling Kimbal’s wedding, Kimbal also being on the board. Murdoch is also an investor in SpaceX.

SpaceX may be rocketing to new heights, after closing out its most successful year yet with its Falcon program, breaking several records for booster and fairing reuse, launch cadence, and tonnage to orbit and the Dragon program sending more cargo and people to orbit.

But one thing is clear, however. Tesla stocks are bottoming. That’s the first problem.   

Tesla stock in free fall

Tesla has lost over US$90 billion in market cap, a rough landing in 2024, and a continuation of a slide that could crash the EV maker’s stock value, data from Refinitiv revealed.

This brings its current valuation at under $700 billion, increasing the gap between it and other big tech, including Apple, Microsoft, Alphabet, Amazon, and Nvidia, which are worth over $1 trillion, with Meta Platforms near that figure at $940 billion as of the third week of January 2024.

Tesla’s share price is down roughly 13 percent in 2024 and nearly 27 percent off its peak of nearly US$300 it reached in the summer of 2023.

According to Barron’s, there are a few non-Tesla reasons why investors might be selling the company’s stock. The US 10-year Treasury bond yield reached just over 3.94 percent, reflecting a higher consumer inflation reading. This has rattled investor confidence that the Federal Reserve will be cutting interest rates soon, the failure of which doesn’t bode well for Tesla stock valuations, which will make cars more expensive to finance, and thus reduce their sales.

Another factor is Tesla’s Chinese price cuts which the company implemented at the start of 2024, which entailed lower prices for cars, lower profit margins and earnings estimates from analysts, stoking fears that prices for new Tesla vehicles will fall around the world as a result.

But stocks are only part of the problem.

EV crashes

Researchers at LexisNexis Risk Solutions found that vehicle owners who convert from gasoline-powered cars to electric ones, are likely to crash more. The frequency of EV insurance claims has risen by about 14.3 percent while the amounts that had to be paid out also jumped by 14.5 percent, according to LexisNexus data.

Car rental company Hertz said it was reducing its stock of EVs for the same reason and Teslas made up about 80 percent of Hertz’s EV fleet.  

Some good news for Tesla

Although the company relinquished its position as the world’s top EV seller, it shipped a record 308,600 cars over the three months ending December 31, 2023, bringing its total for the year to over 930,000 Teslas.

According to cleantechnica.com, the US EV market continues to grow. In Q4, 2024, sales of full battery EVs (BEVs) were up 29 percent QoQ, and 122 percent over Q4 2021.

Tesla accounted for 56 percent of all US BEV sales in Q4 2023. 

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