Elon Musk appeared to be in a defiant mood on Wednesday when he stood before workers at Tesla’s factory near Berlin a week after an arsonist set fire to a high-voltage pylon and halted production.
“They can’t stop us,” Mr. Musk, the company’s chief executive, told workers in a giant tent next to the factory.
But there are growing signs that Tesla may not be as unstoppable as it once seemed. The company’s car sales are no longer growing at a tremendous rate. Chinese automakers and established brands like BMW and Volkswagen are flooding the market with electric cars. And Tesla has been slow to respond with new models.
Mr. Musk’s many foreign ventures and his penchant for making polarizing political statements and attacking people with whom he disagrees have raised questions about how focused he remains on Tesla’s management. Wall Street is increasingly worried about the company: Tesla’s share price has lost a third of its value this year, even as major stock indexes have hit record highs.
“The bet on Tesla has always been a bet on Mr. Musk,” said Eric Talley, a professor at Columbia Law School who focuses on corporate law, governance and finance.
In an interview with former TV host Don Lemon that aired online on Monday, Mr. Musk dismissed the company’s share price slump as part of the cycle.
“Stocks go up and down, but what really matters is making and delivering great products,” Mr. Musk said.
The week-long production halt at Tesla’s Grünheide factory, the second this year, was only a temporary setback. However, the drop in the share price shows that investors are reassessing Tesla’s long-term prospects and are no longer confident that the company – still worth more than any other automaker – will one day dominate the industry.
Mr. Musk can take much of the credit for pushing other automakers to focus on electric cars, proving they could be practical, profitable and fun. Tesla’s Model Y sport utility vehicle was the best-selling car of any kind in the world last year.
But Tesla hasn’t added a mass-market vehicle to its lineup since the Model Y launched in 2020. Chinese automakers such as BYD, SAIC and Geely Auto are introducing dozens of new models. Analysts said Tesla’s Cybertruck, a futuristic pickup that went on sale in limited numbers last year, would likely appeal to a relatively narrow set of buyers given its high price and unconventional design. And while Tesla is working on an electric car that will cost around $25,000, it’s not expected to hit the market in large numbers until 2026.
“I’m a little surprised at this point that there hasn’t been the next thing,” said Michael Lenox, a University of Virginia business professor who studies industries undergoing technological disruption.
Tesla has repeatedly adjusted prices in response to demand, cutting them to boost sales and sometimes raising them again. While the cuts have helped make electric cars more affordable, analysts say the strategy has eroded the company’s profits without doing much to boost revenue. The cuts have also sharply reduced the resale value of Tesla cars, because no one pays more for a used one than a new one.
The strategy trains potential buyers to “wait for a deal,” Gary Black, managing partner of the Future Fund, told X. Mr. Tesla is bullish, but the fund recently sold some of its shares in the company.
Tesla faces particularly stiff competition in China, the world’s largest car market, where more than a third of new car sales are electric. BYD surpassed Tesla in global electric vehicle sales in the last three months of 2023 with a wide range of sedans, sport utility vehicles and inexpensive subcompacts. Its Seagull model sells for less than $12,000 in China.
Even after Tesla’s price cuts, the Model 3 sedans and Model Y SUVs built at a factory in Shanghai are far more expensive than many Chinese models. European and Chinese automakers are also introducing new electric vehicles at a breakneck pace. More than 150 will go on sale by the end of the year, according to HSBC.
At the same time, Tesla is not well positioned to compete in the luxury market because its cars don’t offer as many amenities as cars from the likes of BMW or Mercedes-Benz, said John Helveston, an assistant professor of engineering management at George Washington University who has studied Chinese car buying habits.
“In China, there are so many great options that Tesla just falls in the middle,” Mr Helveston said. “It’s an overpriced car for the luxury you get out of it.”
Tesla has not told investors how it will regain ground in China, which generates most of its sales. The company did not respond to a request for comment.
“What will they pull out of their toolbox other than price cuts to keep them in the mix in 2024?” asked Tu Le, chief executive of Sino Auto Insights, a research firm. “The price reduction tool has lost its effectiveness.”
Mr. Musk’s disdain for the established way of doing things, as well as his love of big engineering challenges, have made it difficult for Tesla to introduce new products quickly, Mr. Helveston said. Cybertruck is an example. It is made of stainless steel, which resists rust better than conventional steel, but is notoriously difficult to work with. The truck arrived two years behind schedule and took resources that could have been used for products with a wider appeal.
“Tesla could do a lot better than if they were less aggressive in trying to do anything new and used half the knowledge out there that works,” Mr. Helveston said.
But doing new things excites Mr. Musk, who smiled with delight when he told Mr. Lemon about the refreshed version of the company’s Roadster sports car, which Tesla planned to introduce at the end of the year. The vehicle will combine technology from Tesla and its rocket company, SpaceX, “to create something that’s not really a car,” he said.
In Europe, the Model Y was the best-selling electric car last year. But Volkswagen and its Audi, Skoda and SEAT brands combined sold more electric vehicles than Tesla on the continent, according to Schmidt Automotive Research. Sales of the Model Y fell at the end of the year after subsidies from Germany and other countries were cut.
Tesla could also suffer from restrictions the European Union is considering imposing on Chinese imports. All Model 3 sedans sold in Europe and the right-hand drive Model Y for Britain are imported from Shanghai. Tesla accounts for one in four Chinese cars imported from Europe, according to Schmidt.
“This would limit the eye-catching but still narrowing of profit margins and create a more level playing field for European automakers that build locally,” said Matthias Schmidt, founder of the research firm. He noted that France took protectionist policies a step further by limiting government subsidies for electric vehicle purchases to those produced in the European Union. Italy has indicated it may do the same.
Mr. Musk is also a source of uncertainty. In January, a judge in Delaware threw out his pay package, worth more than $50 billion, saying Tesla’s board used a flawed process in negotiating his compensation. In response, Mr. Musk threatened to move Tesla’s corporate registration from Delaware to Texas.
Tesla’s board has not disclosed a new pay package for him. Mr. Musk, who oversees SpaceX and several other businesses besides Tesla and X, has threatened to pursue unspecified new ventures outside of Tesla unless he is given control of 25 percent of the company. It currently owns about 13 percent.
“You now have a grumpy CEO,” said Mr. Talley of Columbia Law School. “What does this mean for Tesla’s ability to get Mr. Musk’s attention? Is it possible to just disengage from the company?’
Mr Musk’s visit to Grünheide appeared to be timed to show employees in Germany, some of whom had expressed concern for their safety after the fire, that he remains committed to the company and the plant. The plant produces about 300,000 cars a year, but aims to expand that figure up to one million.
Asked by reporters if he intended to stick with that plan, Mr. Musk replied: “Yes, absolutely.”
Mara Hvistedal contributed to the report.
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