Tesla lost 65% of its value last year. What is going on?

Tesla, once a darling of the stock market, has lost a significant amount of its value over the past months, with its shares down 65% over the last year. This significant drop in value has caused concern among investors and raised important questions about the electric vehicle company’s future. Supply issues, confidence in its CEO Elon Musk and other market conditions have all played their part in Tesla’s stock performance, which nonetheless continues to be one of the most valuable automotive maker in the world.

Supply chain challenges

In a recent statement to its investors, Tesla acknowledged that it has delt with “significant Covid and supply chain related challenges” throughout the previous year. Despite delivering a record 1.3m vehicles in 2022, which represents a 40% increase compared to 2021, this still falls short of its 50% target. Temporary suspensions of operations at its Shanghai plant and plans to cut Model Y assembly lines by 30% in December, Tesla's top-selling model, have further weakened investor confidence.

Musk’s divided attention fears

These supply drags overlap with apprehensive shareholder confidence in Elon Musk, the company’s Chief Executive, who’s continued to make dramatical headlines since acquiring social media giant Twitter in October last year. News stories on Musk’s determination to reform Twitter increased speculation that his attention is divided to the electric vehicle company, particularly at a time supply-side issues and global economic slowdowns.

Lower consumer demand

In addition to internal factors impacting Tesla's performance, the company is also facing decreased demand for vehicles globally as consumers struggle with rising costs of living, higher borrowing costs, and the possibility of a recession. This lower demand has overlapped with increased competition from other automotive powerhouses such as General Motors and Ford and new entrants including Rivian and Lucid Motors.

Bottom line

Nevertheless, while the recent drop in Tesla’s value is certainly a cause for concern to shareholders, it is important to remember that markets are inherently volatile and past performance does not necessarily predict future results. Only time with reveal if Tesla can return to its peak of a $1 trillion market cap.

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It does not take into account your personal circumstances or objectives. Any information relating to past performance of an investment does not necessarily guarantee future performance.

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