Tesla's three consecutive declines, what happened?
Tesla has recently declined, partly due to the sluggish sentiment in the U.S. stock market, and on the other hand, due to the pressures faced by Tesla itself, including weak sales, Musk shifting focus away from electric vehicles, intense market competition, and the need for more time to implement autonomous driving
Tesla's stock price has fallen for three consecutive days, with increasing market concerns over weak sales and intensified competition.
Overnight, Tesla's stock price dropped 3.3% to $417.41, marking the third consecutive trading day of decline, following a nearly 5% plunge last Friday.
Despite the recent decline, Tesla's stock price has still risen about 68% this year, and is currently down 15% from the intraday all-time high of $488.54 set on December 18.
The factors leading to the recent decline include a sluggish U.S. stock market sentiment and pressures faced by Tesla itself, such as weak sales, Elon Musk shifting focus away from electric vehicles, intense market competition, and the need for more time to implement autonomous driving.
1. Sluggish Market Sentiment
Overall market sentiment is the main reason for Tesla's stock price decline.
As the year-end approaches, investor sentiment is generally low. Among the components of the Dow Jones Industrial Average, all but Nvidia saw declines.
On the other hand, investors are concerned that the Federal Reserve's rate cuts in 2025 may not be as significant as expected. Lower interest rates are beneficial for promoting economic growth and making new car purchases more affordable.
According to FactSet data, analysts have an average target price of about $296 for Tesla's stock, significantly lower than the current stock price. This gap may raise investor concerns about whether the stock price is overvalued.
2. Concerns Over Stagnant Sales Growth
Tesla is expected to announce its fourth-quarter delivery numbers on Thursday, with analysts estimating a total of about 510,000 units, slightly below the company's target of 515,000 units. Additionally, Tesla's total deliveries for 2024 are expected to be around 1.8 million units, flat compared to 2023, indicating that Tesla's growth may be stagnating.
In major markets, sales are declining. According to estimates from Cox Automotive, Tesla's sales in the U.S. are expected to drop about 6% in 2024 to 633,000 units, accounting for 4% of the entire automotive market. Sales in the EU and Chinese markets are also expected to decline.
3. Market Share Challenges
As other automakers launch more electric vehicle models, Tesla has inevitably lost some market share. In China, it faces competition from BYD; in Europe, it faces challenges from Volkswagen and BMW; and in the U.S., it competes with General Motors and Ford.
Notably, Tesla's sales have declined even as the overall electric vehicle market is growing. According to research firm Rho Motion, the global electric vehicle market grew by 25% year-on-year as of November, yet Tesla's sales are decreasing.
4. Slow New Model Launches and Autonomous Driving Implementation Still Requires Time
Aside from the Cybertruck, Tesla has not launched any new models since introducing the Model Y in 2020. While investors are hopeful for a potential $25,000 low-cost model from Tesla, the company has yet to showcase a prototype or provide more related informationInvestors have high expectations for Tesla's progress in the field of autonomous driving, while most analysts believe that the widespread use of autonomous taxis will still take several years.
Tesla faces challenges of declining sales and intensified market competition, but investors remain optimistic about the company's long-term prospects. The development of autonomous driving technology and potential policy support could be key factors driving Tesla's future growth. However, whether the company can successfully launch the highly anticipated low-cost model, and how Elon Musk balances his multiple roles, will be important factors influencing Tesla's development