Tesla Lost Almost $100 Billion In Valuation So Far This Year

Good morning! It’s Tuesday, January 16, 2024, and this is The Morning Shift, your daily roundup of the top automotive headlines from around the world, in one place. Here are the important stories you need to know.

Walter Isaacson On Elon Musk(s)

1st Gear: Telsa Lost $94 Billion In Two Weeks

By all accounts, Tesla had a great 2023 when it came to its share prices, which more than doubled in just 12 months. However, the times are a-changin’, and Elon Musk’s Austin, Texas-based automaker is off to its worst start to any year in 2024. It’s happening just as car companies come to terms with slowing growth in demand for EVs.

In 2023, Tesla was the eighth best-performing stock in the S&P 500. So far this year, it’s the eighth worst. From Bloomberg:

The company has lost more than $94 billion in market valuation in just the first two weeks of 2024. It’s not hard to figure out why, as the Austin, Texas-based EV maker has been pounded by a barrage of negative news: an about-face on EVs from the car rental giant Hertz Global Holdings Inc., yet another price cut for its cars made in China, and signs of rising labor costs.

[…]

“Investors’ main concern on Tesla is stagnating growth,” Cowen analyst Jeffrey Osborne said in an interview. The price cuts in China only fan those concerns, because it is starting to look like “a race to the bottom for the EV industry given intense competition in that market.”

The hit to Tesla’s market capitalization to start the year is the biggest the company has seen over a similar period since it went public in 2010. In percentage terms, Tesla’s 12% drop since the start of January is the worst since 2016, when the stock fell 14% over the first nine trading days of the year.

To make matters worse, the odds of an imminent turnaround for the EV maker don’t look good.

Tesla has been cutting prices on its cars aggressively since early 2023 in an effort to boost demand. But the result has been a steady erosion of its once-hefty profit margin. Tesla’s automotive gross margin ex-regulatory credits for the third quarter fell to 16.3% from 27.9% a year ago. And the pressure is only mounting, now that production workers at Tesla’s US plants are getting pay raises.

CEO Elon Musk is obviously taking a pretty big personal hit because of this news. Don’t worry, he’s still the world’s richest person (and he gained more wealth than anyone in 2023), but he has seen his net worth shrink by $23 billion so far this year. How will the poor guy afford rent?

2nd Gear: Lamborghini Sold Over 10,000 Cars In 2023

Unlike Elon Musk, it seems like the rest of the rich are getting richer, because Lamborghini just had its best sales year ever, selling over 10,000 vehicles in 2023. The news came from its Chairman and Chief Executive Stephan Winkelmann, who posted on Linkedin that the automaker “reached another historic milestone.” From Reuters:

Supported by the success of its Urus SUV, which now costs over 230,000 euros ($250,000), Lamborghini has in recent years expanded its output, relying on solid demand from wealthy car lovers.

The carmaker, a subsidiary of Germany’s Volkswagen, delivered a total of 10,112 sports cars and SUVs last year, up from over 9,200 vehicles in 2022, a slide attached to Winkelmann’s post showed.

Rival Ferrari, which will release 2023 data later this year, including those on car sales, shipped more than 13,200 cars in 2022.

Europe, the Middle East and Africa (EMEA) was the region that saw the biggest increase in deliveries for Lamborghini last year, with a 14% rise to nearly 4,000 vehicles, the slide showed. Sales in the America region rose 9% to 3,465, while they grew 4% in the Asia Pacific region to 2,660.

Lamborghini’s range also includes two super-sports cars, the Huracan 10-cylinder and the Revuelto 12-cylinder, its first plug-in hybrid model, which was presented last year. The line-up is set to become all hybrid in the course of 2024, with the new Urus and a new car replacing the Huracan.

This is really heartwarming news to read as I look over my student debt payments from my tiny one-bedroom apartment.

3rd Gear: Musk Wants 25 Percent Voting Control At Tesla

Tesla CEO Elon Musk said he would be “uncomfortable” growing the Austin, Texas-based automaker into a leader in artificial intelligence and robotics without having at least a 25 percent voting control in the company.

That works out to be nearly double his current stake of 13 percent. You may remember that Musk did at one point own more of Tesla, but he sold off billions of dollars in shares in 2022 to help finance his $44 billion purchase of Twitter. Business genius, this guy. From Reuters:

Musk said on Monday in a post on social media platform X, formerly known as Twitter, that unless he got stock in the world’s most valuable automaker that was “enough to be influential, but not so much that I can’t be overturned”, at Tesla, he would prefer to build products outside of the electric-vehicle manufacturer.

He has long touted Tesla’s partially automated “Full Self-Driving” software and its prototype humanoid robots but the electric-vehicle maker generates most of its revenue from its automotive business.

Some analysts have also pegged the technologies, including Tesla’s Dojo supercomputer to train AI models, as drivers of the EV maker’s valuation, with Morgan Stanley analyst Adam Jonas saying in September that Dojo could boost its market value by almost $600 billion.

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In a separate post on X, he said he would be fine with a dual-class share structure to achieve his goal of getting 25% voting control, but was told it was impossible after Tesla’s initial public offering.

To make matters more, let’s say, interesting, Musk is currently facing a lawsuit over his compensation package. Two Tesla shareholders sued Musk and the board in 2018 in an attempt to prove he used his dominance over Tesla’s board to get a larger pay package that did not require him to work at the EV maker full-time.

4th Gear: Hyundai Offering EV Tax Credit Cash Bonus

Hyundai will give as much as $7,500 in cash bonuses for EV buyers in the U.S. in an effort to keep its cars competitive with those that qualify for the Inflation Reduction Act’s vehicle tax credit. From The Detroit News:

The discounts apply to the Ioniq 5, Ioniq 6 and Kona Electric, and the month-long incentive will last through Jan. 31, according to the Korean automaker’s website. Hyundai’s EVs couldn’t meet the requirements under the clean vehicle tax credit program, which aims to encourage domestic production of EVs and components.

Without any operational EV factory in the United States, Hyundai is building an EV plant in Georgia that could start assembly as soon as the end of 2024. Hyundai and affiliate Kia sold a total of 69,259 battery-powered vehicles in U.S. in 2023, the second-biggest EV maker behind Tesla Inc., according to BloombergNEF.

Few vehicles are eligible for the credits, however, and the list of qualifying car models may shrink further due to tough rules pushing automakers to reduce their reliance on Chinese suppliers for parts.

The Biden administration is looking to revive American industry while tilting the economy away from fossil fuels. The IRA also intersects with a separate national security objective: to free the US and its allies, as much as possible, from dependence on supply chains it sees as vulnerable to China.

Hyundai makes some great EVs, and getting thousands of dollars on the hood just makes the deals even sweeter.

Reverse: This’ll Work

Neutral: I’m A British Craftsman

Photo: Spencer Platt (Getty Images)

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