Tesla Is In Immense Trouble and Musk Knows It

Things aren’t going well for the EV juggernaut.

Musk and Tesla have enjoyed a meteoric rise over the past decade, during which time they became giants in the automotive world. This growth seemed set to continue for yet another decade as competitors struggled to catch up, making many believe that soon Tesla would wholly dominate the world of transportation. But recent concerning shifts in the foreign EV and stock markets have shaken this narrative apart, exposed its profound weaknesses, and painted a far grimmer future for Tesla. What’s more, Musk’s recent actions suggest that he knows about this unfortunate reality. So, what’s going on with Tesla?

Let’s start with China. China has enjoyed a similar rise to Tesla over the past few decades and is now one of the largest automotive markets in the world. China is also rapidly adopting EVs, making it one of the most important markets for Tesla. For a while, Tesla sold well in China. But now they are being outdone by local competition.

For example, a Model 3 Standard Range Plus with a range of 275 miles and a 5.3-second 0–60 mph time costs the equivalent of $48,000 in China. But the base model BYD Seal (which is the same size as the Model 3) offers over 300 miles of real-world range for only the equivalent of $31,000! Moreover, a $42,000 version of the Seal can manage 0–60 mph in only 3.8 seconds. Then there is the Zeekr 001. Not only can this car charge twice as quickly as the Tesla Model 3, but it can also do 0–60 mph in 3.8 seconds and has a massive 435-mile range, all for only $48,000. There are also similarly spec’d and priced EVs from XPeng and NIO.

With competition like this, it’s no wonder Tesla is having a hard time in China. Thanks to these fierce new rivals, Tesla missed its 2022 Q3 revenue targets by $500 million and has dramatically missed its 2022 Q4 delivery target.

To remedy this dire situation, Tesla recently slashed its prices in China. The Model 3 SR+ now costs 30% less at the equivalent of $33,500, which is a $14,500 price drop! All other Model 3 and Y variations have had a similar reduction in price. While this might make the Tesla a slightly better buy, it is still more expensive than its Chinese competition.

Based on November 2022 data, Tesla currently sells around 100,000 vehicles per month in China. Therefore, if sales don’t pick up, this price cut could cost Tesla a massive $1.45 billion per month! However, that may not matter because, with the original pricing, Tesla makes an average profit of $9,750 per vehicle. This means that Tesla might actually be selling cars at a loss in China!

To make matters worse, Western countries aren’t being offered these price cuts, which will irritate many buyers as they will feel they are paying over the odds for their Tesla vehicles.

However, this leads us to the biggest issue, as these Chinese vehicles are coming to the US, UK, Canada, EU, and Australia over the next few years. Pretty soon, Tesla may have to implement drastic price cuts around the entire globe, which could entirely wipe out their profit margin and cause their stock price to nosedive.

Yet, this isn’t the only major issue Tesla is facing.

The DOJ is currently investigating Tesla for potential criminal activity. You see, Tesla has been selling its Autopilot as if it were a fully functional autonomous driving system, when in reality, it is far from that, which has unfortunately led to several deaths due to improper use.

Now, one of the reasons Tesla is worth so much money is because investors believed its autonomous driving AI was far ahead of its competition and would be the first to be made available to the public. This means that if the DOJ finds Tesla guilty, it could be a massive blow to Tesla’s value. (To read more about this issue, click here).

But Tesla has already lost the autonomous driving race, as Waymo and GM are currently offering driverless robotaxi services, which is one of the many reasons Tesla stock struggled last year. (To read more, click here).

With all of this in mind, it is no wonder Tesla stock dropped a massive 65% in 2022! And it could easily get worse in the near future.

Tesla sold a total of 1.3 million vehicles in 2022, just slightly ahead of Mazda at 1.2 million vehicles. But while Tesla is currently valued at $345.75 billion, Mazda is only worth $4.75 billion! If Tesla does have to cut prices around the globe, and if its self-driving AI doesn’t dramatically improve, then its value could drop to near-Mazda levels. Now, Tesla will probably still be worth a good chunk more than Mazda, as their vehicle sales will likely increase and they are far more internally integrated than Mazda, but this fact does demonstrate just how far Tesla’s stock could fall.

With all of this in mind, it is no wonder Musk has been silently exiting Tesla. All in all, Musk has sold a massive $22.9 billion worth of Tesla shares throughout the course of 2022. It’s almost like he knows these shares have reached their peak value and is cashing in before it’s too late…

It’s true that the Cybertruck, Semi, and Model 3 refresh could help turn the tides on this situation. But because Tesla has historically struggled to scale models, it is difficult to see how these models could solve these issues on their own. I love what Tesla has done, and I am praying that Musk can turn this around — after all, if anyone can, it is him — but sadly, I can’t see how he could.

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