Tesla Stocks Plummet… Wrongly?

The life of an entrepreneur is made up of ups and downs, but this Thursday, April 13th, will leave few good memories for Tesla founder Elon Musk.

An exploding rocket and a plunging stock price. Welcome to the world of the flamboyant Elon Musk.

The day had started well for the world’s leading electric manufacturer. For the first quarter of 2023, the Model Y was the top-selling vehicle on the European market with over 65,000 units sold. A great achievement for Elon Musk, who had not hesitated to declare at launch that his flagship model would be the best-selling worldwide.

Behind these impressive figures, one must primarily see the success of Tesla’s highly aggressive pricing strategy. This allows the Model Y to display a selling price at dealerships identical to that of a Renault Zoe electric, which, without detracting from the merits of the lozenge-shaped model, can hardly compete with the American in terms of performance or equipment.

Financial analysts quickly jumped on the subject and did not hold back against Tesla. While the group’s revenue now reaches $23.3 billion with an exceptional growth of 24%, they simultaneously highlight the impact of price reductions on profit margins, which fell from 16.8% in 2022 to 11.4% in 2023, representing a 24% drop in profits inversely proportional to the rise in turnover.

As a direct consequence, Tesla’s stock price dropped by 9.75% during the day. That still amounts to nearly $13 billion lost, solely for Elon Musk! How can such a decline be explained when the group continues to see its sales grow, remains highly profitable, and has margins still higher than those of traditional automakers?

When Tesla lowers prices to make its cars more attractive, Chinese and generally Asian automakers are launching more low-cost models in succession. And if Chinese production could have been a source of ridicule in recent years, it is no longer the case today, with models from BYD, MG, or Aiways that can compete with those from Stellantis or VAG alliances.

The battle promises to be fierce in the coming years, and Tesla cannot afford to keep sacrificing its financial margins on the altar of sales. Renault and Volkswagen, among others, constantly emphasize their refusal to enter this vicious circle. After digesting the disappointment of the successful test flight of its Starship mega-rocket, Elon Musk will need to reassure financial markets with convincing responses.

READ ALSO > Sales: Tesla makes the counters run wild