Tesla (TSLA) has been a monster stock over much of its history, especially from its stratospheric run from mid-2019 to late 2021. But in 2022, Tesla stock has been a big loser, on track to plunge nearly 52% as of Nov. 22.
That would easily surpass 2016’s 11% fall, the only other annual decline since Tesla stock came public in 2010. The sell-off has intensified, with the EV giant losing nearly half its value in just the past two months. On Monday, TSLA stock skidded 6.8% to a fresh two-year low, the S&P 500’s worst performer for the session.
Here are some major headwinds facing TSLA stock, from Elon Musk’s “Twitter circus” to Tesla demand concerns.
Tesla Stock Annual Performance
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China Covid Concerns
Beijing is essentially on lockdown amid the city’s first Covid deaths in months. Further restrictions were imposed in China on Tuesday as coronavirus cases are surging toward official all-time highs.
Keeping a lid on the more-infectious omicron variants will be extremely difficult, given that hundreds of millions of Chinese have not contracted Covid yet.
And that comes after China had eased restrictions slightly, raising hopes that the country would pull back its zero-Covid policy.
Renewed restrictions will further chill China’s ailing economy, reducing demand for EVs, including Tesla’s, and raising renewed risks of production interruptions.
China’s Covid woes feed into Tesla demand concerns, partly due to a big Shanghai production increase. Tesla already cut prices in China, but there are local media reports of further cuts before year-end, but wait times are essentially at zero. Tesla may be betting on a big quarter for European sales, but that could draw down backlogs heading into 2023.
On Jan. 1, EV subsidies end in China and Norway, with Germany cutting subsidies substantially. Sweden has just ended its EV subsidies while the U.K. is ending its program. All of that could hurt Tesla EV demand and pricing in Europe and China.
That comes as China’s EV competition intensifies, with more and more models from the likes of BYD (BYDDF), Nio (NIO), Li Auto (LI) and more taking on Tesla’s aging Model 3 and Model Y. Europe’s EV market also is getting more crowded.
On the flip side, Tesla will be eligible for new U.S. tax credits of up to $7,500 per vehicle. Tesla still faces far less competition in its home market than in Europe and China.
The Tesla Cybertruck is expected to begin production next year, with Musk expecting “early” output in mid-2023. But if the oft-delayed Cybertruck stays on schedule, volume deliveries may not start until year-end or 2024.
Elon Musk’s Twitter Reign
Tesla CEO Elon Musk has owned Twitter for less than four weeks, but already seems like ages. He’s slashed staff by half, with many other employees exiting. Over the weekend, Musk reinstated Donald Trump’s Twitter account, but then followed up with a vulgar meme directed at the former president. Advertising revenue is plunging.
All of that has raised concern that Musk is damaging his image. Even longtime TSLA bulls fear that could tarnish Tesla’s brand.
Musk also may sell even more Tesla stock to pay Twitter’s bills. Musk has sold Tesla stock several times this year, citing Twitter as the reason for the two most-recent batches.
TSLA Stock Follows EV Rivals, Aggressive Growth
Tesla stock is not doing well. But it’s not alone. Aggressive stocks have had a terrible 2022. Tesla’s EV rivals in particular have struggled, including Nio stock, Li Auto, Rivian (RIVN) and BYD. So by that measure, TSLA stock doesn’t look especially bad over the course of 2022. However, BYD is flat in November while Nio and Li Auto are up this month, while Tesla stock has lost one-fourth of its value.
More broadly, a bear market has ruled for most of the year. While the major indexes have rebounded from October lows, they are still down significantly for the year, especially the Nasdaq.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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