Tesla Joins My Imploded Stocks, -70% From Peak: Object of Religious Worship Turns Automaker

Beyond consensual hallucinations, the real world isn’t fun for automakers.

By wolf richter For wolf street,

Tesla shares fell about 1.8% to $123.15 on Dec. 23, where they were first in August 2020. They are now down 70.3% from the Nov 4, 2021 high, and thus qualify for my ballooning pantheon. Of broken stock, For this honor, our heroes must decline by at least 70% from their peak levels in an era of money printing and consent hallucinations (via Data) YCharts,

The stock still has a PE ratio of 38, which is ridiculously high for a profitable automaker, but ridiculously low for the object of religious worship that Tesla used to be. It was run by Elon Musk who used to walk on water. But walking on water got boring, and Elon is having too much fun chatting nonsense on Twitter, and he’s busy tweeting goofy stuff and annoying people, including Tesla’s current or potential customers and shareholders.

So now, as people are coming out of the consensus delusion, they realize that Tesla is just one automaker, there’s a lot of competition in the EV space, and Musk doesn’t walk on water anymore. They see that Tesla now has to do stuff that other automakers had to do for decades, such as offering big incentives on its vehicles, hiring freezes and lay-offs, to keep them moving before the end of the year. Talking up, and even in a desperate move, using a potential share buyback to try to boost its share price. But the stock kept plunging.

And what’s the next shoe to drop? Will Tesla have to spend a few billion dollars a year on advertising, just like other automakers have been doing for decades, in order to move massive irons across the country?

And people suddenly realized that Tesla, rather than being an object of religious worship, is in the same overall industry – the auto industry – as other automakers, and that in terms of unit sales, this auto industry has been stagnant for decades. , interrupted only by the deep chasm in the middle.

Turns out, EVs are only replacing ICE vehicles, not adding to them, this industry is a hard zero-sum game, and every new competitor is eating a bite out of everyone’s lunch, and for the industry. The only way to increase revenue is by selling expensive vehicles year after year, That’s what they’re doing, which is probably why vehicle sales look the way they do. (2022 new vehicle sales data through November; my estimate for December):

That’s the real world for automakers. and tesla is joining in,

Tesla pissed off these legacy automakers and got them off their lazy butts about EVs, and single-handedly revolutionized the auto industry. Musk was able to pull it off because investors saw him walking on water.

But now the old automakers have woken up from their stupor, and a bunch of new ones have come into the market, and some of them actually have EVs on the road, and investors have poured hundreds of billions of dollars into these EV makers, And older automakers who are now chasing Tesla with their EVs.

Now, Tesla is having to do what other automakers have been doing for decades: pile incentives on its Model 3 and Model Y to move iron. $7,500 plus “10,000 miles of free Supercharging,” if you take delivery of the vehicle by December 31, as stated on its website.

So there’s a bunch of inventory, the waiting list is gone, and you can just go and pick one up, and get $7,500 of credit and 10,000 miles of free Supercharging?

This offer is better than their previous offer of $3,750 in credit for the Model 3 and Model Y.

So Tesla faces a situation: Congress passed legislation that gives $7,500 in incentives to buyers of certain EVs, and Teslas qualify, but those incentives don’t kick in until January 1, and some others Automakers still benefit from the old $7,500 incentives that expired on Tesla years ago.

Business could have taken a serious hit had people decided to wait until January 1st to receive that federal $7,500, and so Tesla had to choose: match it, or report a nasty surprise in Q4 deliveries Which can further increase its stock?

And who knows what else might be going on. Potential customers may have been put off by Musk’s goofy tweets, even if you never see them on Twitter, because they get picked up everywhere in the media. And while these laid-off customers were sad about it, they learned that there are few other EVs out there, even actual 4×4 580-hp pickup trucks, while Tesla is still promising to build one. .

To ease the intense selling pressure on Tesla shares, Musk, who’s said a gazillion times before that he sold shares to sell a whole bunch more, including $3.6 billion last week, brought his total to nearly $40 billion. happened. Tesla shares plunged 8.9% during regular trading hours on Thursday evening at ever-lower prices, he said in a Twitter Space audio chat, reported by reuters: “I won’t sell the stock until I know, maybe two years from now. Certainly not next year under any circumstances and probably not the year after that.”

According to Reuters, “I need to sell some stock to make sure, like, the powder is dry … to account for worst-case scenarios.” Twitter seems to have taken into account the worst-case scenario.

No regulator will ever act on what Musk says or tweets. So he says and tweets anything, no matter how goofy, that’s fine for most people but not good for the CEO, and not good for shareholders if this goofy stuff goes in the wrong direction, as It has been doing this lately.

In the days when he was still walking on water, and when the trading day was still ruled by consensual hallucinations, his goofy tweets would send stocks soaring. But now Tesla is becoming like other automakers with the same problems, and what matters is the harsh reality of the auto market that has now woken up to EVs.

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