Tesla Falling Amid Slumping Growth Outlook...

Musk "Will Face Difficult Times" Demand Slump Concerns
Wall Street Lowers Tesla Price Targets One After Another

U.S. electric vehicle company Tesla's stock price is plummeting sharply following a third-quarter earnings shock combined with CEO Elon Musk's remarks on weak demand. Wall Street is raising concerns about chronic low growth and lowering expectations for Tesla, making further stock price declines seem inevitable.

Tesla's stock, listed on the New York Nasdaq Stock Market, closed at $220.11 on the 19th (local time), down 9.30% from the previous session. Over the past two days, Tesla's stock has plunged 14%, marking the largest two-day drop since November 2021 (16.3%). The market capitalization shrank to $698.6 billion (approximately 949.4 trillion KRW) based on the closing price that day, falling below $700 billion.

The sharp decline in Tesla's stock price was caused by the third-quarter earnings shock announced the previous day combined with Musk's comments. During the conference call following the earnings announcement, Musk warned that the most difficult period in Tesla's history could return, igniting concerns about medium- to long-term growth slowdown. He cautioned, "Tesla is a very great ship, but it is necessary to make clear that it can go through difficult times amid the stormy economic conditions." He added, "Facing challenges in the storm is something we all experience, and this is not limited to the automotive industry."

[Image source=Reuters Yonhap News]

While maintaining the production target for this year (1.8 million units), he expressed pessimism about demand forecasts. He said, "People hesitate to buy new cars if there is uncertainty in the economy," citing high interest rates and the resulting consumer installment burdens as factors raising concerns about demand slowdown. He also indicated that the recent price cuts were aimed at boosting demand and suggested that further reductions in new car prices might be possible. He apologized, saying, "Perhaps I am overly paranoid due to post-traumatic stress disorder from my experiences in 2009 and 2017?2019," adding, "As you know, the automotive industry is somewhat cyclical."

Above all, the fact that Tesla's new car strategy, which had been a driver of high growth, is reaching its limits has worsened investor sentiment. Musk said that Tesla is facing difficulties in mass-producing the upcoming electric pickup truck, the Cybertruck, stating, "(We) may face tremendous challenges until the Cybertruck reaches mass production." He added that it would take one to one and a half years before the Cybertruck positively impacts cash flow. Tesla announced that the first deliveries of the Cybertruck will begin at the end of next month, which is more than two years later than the originally announced launch schedule (2021) when Tesla first unveiled the Cybertruck to the media in 2019. Since launching the Model Y in 2020, Tesla has not introduced any new vehicles.

[Image source=AFP Yonhap News]

In its earnings disclosure the previous day, Tesla reported third-quarter revenue of $23.35 billion, a 9% increase from the same period last year, but below market expectations of $24.1 billion. Moreover, net income plunged 44% year-over-year to $1.85 billion (approximately 2.5 trillion KRW). Earnings per share also fell short of market expectations ($0.73), coming in at $0.66. The automotive gross margin, a key metric watched by investors, dropped to 16.3%, the lowest in four years.

Wall Street is also lowering its expectations for Tesla. According to data compiled by financial information provider LSEG, 14 Wall Street analysts have lowered Tesla's target price to $260. Deutsche Bank commented, "The third-quarter earnings miss, along with cautious remarks from Musk regarding next year's outlook, the slow and costly production process of the Cybertruck, and the uncertain schedule of the next-generation platform, reinforce concerns about the company's challenging fundamentals heading into next year." Morgan Stanley also said, "This conference call was the most cautious we've heard in recent years," adding, "It raises the question of whether Musk's warning is about interest rates or if it is due to declining market competition (the rise of Chinese electric vehicle companies) or weakening demand."

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