Musk's 'Wingless Fall' After Taking Over the Car Kingdom

NYT "Facing Risks of Litigation, Stock Prices, and Autonomous Driving"

[Asia Economy Reporter Yujin Cho] Elon Musk, CEO of Tesla, who shook the global automobile industry, is falling. Starting from founding PayPal, the world's first simple payment company, he built a vast empire in advanced scientific fields such as electric vehicles, space development, solar power generation, and artificial intelligence (AI). However, with his core electric vehicle business struggling and the reckless acquisition of Twitter last year, he is rapidly losing market trust. Once hailed as the most innovative entrepreneur since the late Steve Jobs, Musk has been called a "clown" by Time magazine due to his capricious and impulsive remarks and a series of eccentric behaviors.

The New York Times (NYT) on the 17th (local time) cited lawsuits, plummeting stock prices, and autonomous driving technology as the challenges Tesla faces this year. The most imminent risk is lawsuits related to autonomous driving. Tesla and Musk are embroiled in various lawsuits accusing them of misleading consumers with false information about autonomous driving to boost sales and attract investment. Starting with the first trial scheduled next month, four trials will follow consecutively. NYT pointed out, "The numerous lawsuits currently pending ultimately converge on the conclusion that Tesla has continuously inflated consumer expectations and downplayed related risks."

Tesla's autonomous driving technology has been plagued by various accidents, and as the commercialization of full autonomous driving continues to be delayed, technical skepticism is growing. It is also evaluated that the technological gap with latecomers in AI, the core of autonomous driving technology, is widening. Recently, an internal whistleblower revealed that a video promoting the autonomous driving feature of the 2016 Model X was staged rather than actual footage, worsening Tesla's position in lawsuits. However, Musk has consistently remained unresponsive. Donald Slavic, the plaintiff's attorney in this trial, said, "If it were another automaker, they would have reached a settlement with the plaintiffs (consumers) before the trial even began," criticizing Musk's passive stance in the legal battle despite the enormous damage the litigation risk could inflict on the company.

[Image source=AP Yonhap News]

Amid various adverse factors, Tesla's stock price is on a downward trend. Tesla's stock price fell nearly 70% last year. Despite unprecedented recession caused by semiconductor chip shortages and supply chain disruptions following the COVID-19 pandemic, Tesla, which had achieved record growth, ended up with the worst stock price decline in history. Matthias Schmidt, a German automotive market analyst, said, "Electric vehicle companies including Tesla will face a tough competitive market environment this year," citing interest rate hikes, reduced vehicle demand due to economic recession, intensified competition among new cars, and the end of subsidy benefits in major countries as the background.

The market capitalization is also shrinking day by day along with the stock price decline. Tesla's market cap once soared well beyond $1 trillion. At its peak, it boasted a valuation larger than the combined market caps of the global big seven automakers (Toyota, Honda, Volkswagen, Mercedes-Benz, BMW, Ford, General Motors). However, with the core business underperforming and Musk-related risks added, the market fandom quickly cooled, and the market cap shrank to $415.2 billion as of the close on the 17th. Its market cap ranking also dropped significantly from 5th to 36th in the S&P 500. The market now evaluates that Tesla is no longer a dominant player in the global electric vehicle market. Even Dan Ives, an analyst at Wedbush known as a Tesla bull, bluntly stated, "Tesla's Cinderella story is over."

[Image source=Reuters Yonhap News]

As Tesla's stock price was sliced last year, the "Tesla bubble theory" has gained more traction. Famous investors have already turned their backs, and global investment banks (IBs) such as Goldman Sachs have been lowering their price targets for Tesla one after another. Andrew Left, founder of Citron Research, predicted further declines, saying, "Tesla is still an expensive stock. The (decline) is not over yet."

This content was produced with the assistance of AI translation services.