Tesla: A Decline Many Wish For

Tesla Tumbles as Growth Slows. That’s what the NY Times writes. Tesla’s Decline Into Normality, says Seeking Alpha. Will Tesla’s Profits Keep Falling in 2024?, wonders Motley Fool. Tesla Stock Should Trade Near Ford’s Valuation, Says an Analyst. What analyst is that?

What’s going on? Is Tesla about to go bankrupt? Are they laying people off? Are they no longer selling cars? Did they kick some kittens off the Berlin-Grünheide factory premises? Or did Musk cheat on his marijuana emissions?

No, much worse: they made a profit, achieved record sales, took the top spot for the best-selling car worldwide – even ahead of all combustion cars – but above all and most seriously, they have Elon Musk as their boss. Reasons enough why the media in the home countries of the companies affected by the upheavals caused by Tesla are now conjuring up the final demise of the troublesome newcomer.

It seems to be a new edition of the popular “Tesla has to prove first that…” in German-speaking countries. No sooner has Tesla proved that they can do it than the next variation comes along. It is a desperate search for reasons why the unpopular troublemaker of their own automotive tranquillity will soon go away again. But the more years go by, the more it resembles a child alone in the woods, singing “Lalalala” loudly so as not to be frightened. Couple the whole thing with German hurray-patriotism and exaggerated references to the superiority of their own manufacturers and it quickly becomes hysterical. Even the supposed and smallest defects are seen as an elephantine reason for the downfall of the evil Americans.

Tesla’s annual losses/profits from 2009 to 2023

I know what I’ve said here sounds very polemical, but how can we remain serious when we compare the figures with the hysteria? Let’s first take a look at the profit for 2023 and previous years. Last year, Tesla generated a net profit of almost 10 billion dollars with 1.845 million cars sold.

Vehicles delivered from 2013 to 2023

Growth amounted to 35 percent in production and 38 percent in deliveries compared to the previous year. This rate is at the lower end of Tesla’s usual growth over the past 10 years. This indicates that Tesla is facing increased competitive pressure, especially from Chinese companies.

Annual growth rates in production

At the same time, Tesla celebrated a milestone: the Model Y was the best-selling car worldwide across all drive types. The Model Y beat the Toyota RAV4 and the Toyota Corolla to the top spot. And now don’t come to me with the argument “But please, Tesla can only do that because they have such a limited number of models. Volkswagen has many more and they divide them up. If you add them up, then you would have/had/do/could have…” Please, that’s just mimimi.

But all these success figures don’t hide the fact that Tesla’s impressive run has lost speed. The profit included one-off tax gains of 5.9 billion dollars. Although the cost per vehicle fell, this was more than offset by price reductions, which were more than compensated for by increased competition in China and the loss of tax rebates when buying an electric car – including in Germany. The profit margin fell as a result, but is still positive. This in turn shows the cost structure that Tesla can work with, as Ford is losing 30,000 dollars per vehicle with its Ford Lighting electric pickup. And hardly any other manufacturer is making money with electric cars. Ford and Volkswagen, for example, have even been forced to reduce their electric car production as they would incur massive losses at current prices and cannot afford further price reductions. The investor Cathie Wood has scolded Ford for not being able to achieve scaling effects and thus cost reductions to one unit, which in turn prevents Ford (and VW) from gaining market share in electric cars.

However, Tesla was dealt a blow on the stock markets and its share price fell. In the longer term, however, the slump is hardly noticeable, as this share chart over a five-year period makes clear.

Tesla share price on January 30, 2024 with five-year view

If we compare the five-year performance of Tesla’s share price with that of VW, Mercedes Benz and BMW, then Tesla’s share price is virtually spoiling investors.

Chinese manufacturers have also seen their share prices fall since the start of the year. BYD with -10.7%, Nio with -30.3%, Li Auto with -22.8%, Geely with -3% and XPeng with -38.5%. Looking only at Tesla’s share price and deducing the decline from that is simply stupid when the entire stock market is moving downwards.

Don’t forget that the collapse in Tesla’s share price destroyed a value that was equal to the total value of BMW on the stock market. The share price is now rising again. Tesla is still worth more than twice as much as BMW, Mercedes-Benz, Porsche and VW combined.

Market Capitalization in US dollars of the ten most valuable automotive companies on 1/30/2024

Other news from Tesla’s financial statements showed that deliveries of the latest model, the Cybertruck, have begun and over 1,000 units have now been delivered. The start of production of a mass-produced and affordable NextGen model has been announced for 2025.

The record growth in the energy sector was particularly pleasing. Energy storage more than doubled by 125 percent and profits increased almost fourfold. One fly in the ointment: solar installations shrank.

In the USA, all(!) OEMs adapted the NACS charging standard (which Tesla uses) so that they can all use the Tesla Superchargers, which is a real weak point for all other electric car manufacturers. We can tell you a thing or two about that, because with the new addition – a Lucid Air – finding a working Fastcharger has become a game of chance on long journeys. Something I hardly give a second thought to with Tesla. Tesla’s Supercharger network on its own is valued at up to $100 billion by Morgan Stanley analysts.

Competitors are following Tesla’s lead not only in this area, but also when it comes to innovative production methods. Some others also want to introduce the gigapress, even though Tesla’s own experts have been saying for years that it wouldn’t work. Then Tesla just did it, and now everyone wants it. Others also want to copy Tesla’s speed of innovation.

Tesla owners didn’t even notice the recall campaigns that had to withdraw some functions from the driver assistance system. It came over-the-air (OTA). A function that is still a closed book for others, even if they are slowly catching up.

As for “recalls” in general: Porsche, Audi, Mercedes, Hyundai, Kia, Jaguar, Ford, Toyota, Lexus or Stellantis all had recalls in 2023. For most brands, that means taking the car back to the dealer, not just an OTA like Tesla.

And what else? I see some exciting developments, even if it is not certain whether and when they will really be relevant to revenue. The Tesla Bot Optimus is impressive, but it remains to be seen when it will really be used in factories and thus save costs. Tesla’s machine learning and AI dojo, which is used to train the FSD Beta and other functions from the data of the more than 5 million customer Teslas, is also located in the cloud. These developments are happening incrementally, as I have seen for over a year as an FSD Beta user. And it is precisely these projects that could pave the way for a multi-trillion dollar company in the long term.

Do I see anything similar with German manufacturers? Nothing really stands out. Neither with electric cars, nor with autonomous driving, as I have described in detail here and here.

To conclude, I am of course disturbed by Elon Musk’s increasingly erratic behavior. He is becoming more and more of a burden than an asset for his companies. And the slump in profits despite record sales should be looked at more closely, even if Tesla is investing a lot of money in innovation projects and new factories.

Here’s another tidbit for the regulars who like to spout urban legends about electric cars. Do you remember that Teslas surely electrify the occupants during floods? Well, while the engines and exhausts of combustion vehicles run dry, Teslas simply drive through, even if the water is up to the windshield. Here is a recent video from San Diego, where some streets were flooded after heavy rainfall. Note the flooded VW Beetle.

So if this is what decline (or sinking) looks like at Tesla, then I know some German manufacturers who would very much like to see it for themselves.

This article was also published in German.

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