Tesla Inc. (NASDAQ: $TSLA) is a major American automotive and energy company that leads in the design, development, manufacture, and sale of EVs, energy generation, and storage systems. It is most famous for its electric vehicles, such as the Model Y and Cybertruck.
Tesla faces a tough year ahead as it grapples with slowing demand, increased competition, and a need to streamline operations. According to a memo first reported by Electrek, Elon Musk plans to cut over 10% of the company’s global workforce, equating to around 14,000 jobs.
The job cuts come at a critical time for Tesla as global EV sales decline. Its global first-quarter deliveries totaled just 386,810, the lowest quarterly level since Q2 2022, as Tesla faced production challenges and factory shutdowns. Analysts are bracing for more bad news when Tesla reports Q1 earnings on April 23, with projections for a 38% drop in EPS to $0.52
Tesla has reduced the monthly subscription price for its Supervised Full Self-Driving (FSD) feature from $199 to $99, a significant price cut. Additionally, Tesla quietly signed a strategic agreement with India’s Tata Electronics to source semiconductor chips for its global operations, signaling the electric vehicle maker’s growing focus on the Indian market. Tata Electronics is expected to become a crucial supplier for major multinational firms, further enhancing India’s position in the semiconductor supply chain.
Demand Concerns Loom Large
The slowdown in EV demand has hit Tesla particularly hard, with higher electricity costs and increased competition from Chinese rivals like BYD putting pressure on sales. In the UK, fully electric cars accounted for 15.2% of new registrations in March, down from 16.2% a year earlier. Meanwhile, Volkswagen reported a 25% drop in European EV sales.
“There is no denying that the demand environment has deteriorated,” said Baird analyst Ben Kallo, who estimates Tesla will deliver 1.84 million vehicles in 2024, down from the consensus estimate of 1.94 million. Kallo noted that Tesla’s China insurance registrations in the first week of April were down around 40% from the prior quarter and 70% year-over-year.
The demand strain has forced Tesla to adjust its pricing and incentive strategy numerous times. It recently raised prices on existing Model Y vehicles in the US while cutting prices in China, Australia, and Europe to stimulate sales. However, these moves have weighed on Tesla’s profit margins, which plunged from a peak of 30% in Q4 2021 to just 17.6% in Q4 2023.
Robotaxi Dreams vs. Affordable EV Reality
Adding to Tesla’s worries, the company has reportedly canceled plans for a long-promised $25,000 entry-level EV, focusing instead on developing its self-driving robotaxi platform. While Elon Musk has promised to unveil the robotaxi on August 8, analysts warn that full autonomous driving capabilities remain years away.
“If robotaxis is viewed as the ‘magic model’ to replace Model 2 we would view this as a debacle negative for the Tesla story,” said Wedbush analyst Dan Ives. “It would be a risky gamble if Tesla moved away from the Model 2 and went straight to robotaxis.”
Ives and other analysts believe a more affordable, mass-market EV is crucial for Tesla to maintain its growth trajectory and compete with the flood of new EV models from legacy automakers and Chinese upstarts. Canceling the Model 2 in favor of the robotaxi could alienate price-conscious consumers and cede significant market share to the competition.
Regulatory Scrutiny Adds to Challenges
Tesla’s troubles are compounded by increasing regulatory scrutiny in the US and abroad. The NHTSA has an ongoing investigation into Tesla’s Autopilot system after determining it is prone to misuse, leading to over 2 million vehicles being recalled. Regulators in Norway and Sweden have also launched investigations into suspension and steering issues in Tesla’s Model S and X vehicles.
These regulatory headwinds and the company’s well-documented quality control issues raise concerns about Tesla’s ability to maintain consumer trust and satisfaction as it navigates a challenging market environment.
Tesla Stock Slides Amid Layoffs and Demand Concerns
Tesla’s stock performance has taken a hit in 2024, falling around 30% YTD as the company grapples with slowing demand and aggressive competition. As of Monday, April 15, at 2:36 PM EDT, TSLA stock was down 5.15% to $162.24 as investors brace for the company’s Q1 earnings report.
With Tesla’s global first-quarter deliveries falling to the lowest level since Q2 2022, the market will closely watch the company’s ability to reignite sales momentum. The stock’s Relative Strength Index (RSI) of 39.72 indicates an oversold position, as the Monthly price chart indicates a Bearish Pennant for the stock.
Should You Invest in Tesla Stock in 2024?
Tesla’s stock performance in 2024 has been dismal, with shares declining nearly 30% as the company navigates a perfect storm of falling demand, increased competition, and regulatory headwinds. The abrupt cancellation of a promised $25,000 EV model in favor of the unproven robotaxi platform is also a concerning strategic shift that has rattled investors. Moreover, Tesla’s job cuts, plunging profit margins, and weakening sales trends all point to significant challenges.
Given the uncertain outlook, cautious investors may want to wait for clearer signs of a turnaround before considering Tesla as a long-term investment opportunity. The company’s ability to reignite demand, control costs, and execute its product roadmap will be critical in determining the stock’s trajectory in the coming year.
Click Here for Updates on Tesla – It’s FREE to Sign Up for Text Message Notifications!
Disclaimer: This website provides information about cryptocurrency and stock market investments. This website does not provide investment advice and should not be used as a replacement for investment advice from a qualified professional. This website is for educational and informational purposes only. The owner of this website is not a registered investment advisor and does not offer investment advice. You, the reader / viewer, bear responsibility for your own investment decisions and should seek the advice of a qualified securities professional before making any investment.