How Tesla’s woes could benefit competitors like GM, Ford

By Jordyn Grzelewski and Kalea Hall

After Tesla Inc.’s shares closed their worst year ever, they continued to fall Thursday — a clear signal of investor concerns swirling around the leading electric-vehicle maker even as competitors like General Motors Co. and Ford Motor Co. look to steal some of its business in 2023.

Tesla’s challenges are myriad: Gloomy macroeconomic conditions. Signs of softening demand. Headwinds in China, a key market for Tesla and EV sales broadly. Increasing scrutiny of its promises around the capabilities of Tesla’s advanced driver assistance system. An aging product lineup. An EV market that promises to be more competitive than ever.

And then there is the spillover from CEO Elon Musk’s messy takeover and management of social media site Twitter Inc., a purchase Musk funded by selling billions of dollars in Tesla stock. As these factors weigh on a company that has dominated the EV market for more than a decade, experts say it could prove advantageous for legacy manufacturers like GM and Ford as they accelerate their electrification strategies and aim to overtake Tesla.

“The Twitter train wreck situation has cast a dark shadow on Tesla,” Wedbush Securities analyst Dan Ives said in an interview. “And ultimately it’s a spiderweb that Musk created around this $44 billion Twitter mistake that we believe has taken $600 (billion) to $700 billion of market cap off Tesla.”

He added: “Right now, there’s a lot of Cabernet and Champagne being drunk in the 313 area code as they watch this Musk implosion.”

The Austin, Texas-based company’s stock traded Thursday at around $108 per share after a decline of 70% from a year ago. The Detroit News sent a request for comment via email to Tesla, which disbanded its press office, and in response got a message that the account’s inbox was full.

Tesla customer Lex Friedman, 42, of Manalapan, New Jersey, already owns a 2017 Tesla Model S and a 2019 Tesla Model X. He was considering a third Tesla for his daughter — until he started to question Musk.

“I still have a lot of affection for the cars themselves, but it feels a little bit like driving around while wearing a MAGA hat and waving a Trump flag … which I wouldn’t want to do,” he said.

The sentiment underscores a dynamic that appeared to work well for a while: the Tesla and Musk brands are inextricably intertwined. Musk’s headline-grabbing actions around the Twitter takeover — firing thousands of employees, appearing to change platform policies on the fly, using the platform to express certain political views — threatens to alienate customers like Friedman.

“Even though Musk on Twitter, there’s a cult hero status, by opening the political firestorm, it starts to alienate 50% of the population,” Ives said. “And when you’re trying to sell to the masses, that’s not a good thing.”

One recent survey suggested that Tesla is becoming a partisan brand. The Wall Street Journal recently reported the results of a survey by Morning Consult indicating that the number of Democrats with a positive view of the EV maker has been trending downward, even as positive views among Republicans rise.

Before going with Tesla, Friedman had a Nissan Leaf and felt “real range anxiety” with its full charge of only 89 miles. He looked at Tesla’s products, which offered hundreds of miles on a single charge, and made the switch. Friedman isn’t in a rush to dump his Teslas, but he’s considering alternatives for his daughter. Knowing that he definitely wants a battery-electric vehicle for her, he’s looked at the Kia EV6, Hyundai Ioniq 5 and the Ford Mustang Mach-E.

The options Friedman is considering highlight another reality facing Tesla: EV buyers have more choices than ever before, with the prospect of many more to come in the showrooms of established dealer networks.

This year, GM is launching three electric vehicles: the Silverado, Blazer and Equinox EVs. Ford already has its top-selling Mach-E and the F-150 Lightning, and recently became the No. 2 EV maker in the U.S. There’s also competition from Japanese, Korean, European and other start-up American automakers, including from the Volkswagen ID.4, Kia EV6 and Rivian’s R1T and R1S.

“Now, we actually have focused product that will easily go toe-to-toe with Tesla when it comes to the basics of range and performance,” said Ivan Drury, director of insights for auto information website Inc. “The fact that (Elon’s) kind of unraveled at the same time as the automakers have fantastic products, I just can’t imagine a worse time for him, but a better time for the OEMs.”

Still, it will take time for the other automakers to catch Tesla, which holds 63% of U.S. market share for EVs as of November, according to Edmunds. But its share is dropping: the EV maker commanded 80% in 2019.

S&P Global Mobility expects Tesla’s EV market share to drop below 20% by 2025, by which point the data provider expects the number of battery-electric nameplates to rise to 159 from 48 at present. S&P analysts chalked up the market share losses in part to pricing competition — which Mark Barrott, a principal in Plante Moran’s strategy and automotive practice, views as one of Tesla’s biggest obstacles.

In an interview, Barrott noted, for example, two key EV milestones coming later this year: GM launching the all-electric Chevy Equinox that will be priced at around $30,000 in model year 2024, and Ford this year ramping up to full production of its electric F-150 Lightning. Tesla, meanwhile, has alluded to launching a lower-cost vehicle but hasn’t announced specifics.

“That’s their biggest issue right now. Tesla has a target on its back,” said Barrott. “If you talk about those OEMs — GM, Ford, VW — they all say that their target is for their EV production to exceed Tesla’s by 2025. Which means about a million-plus units a year. And if they get the pricing right and they get the product right, there’s a very good chance that they’ll take over.”

“(Musk) had almost a 10-year-run of the premium EV market with really no competition,” said Karl Brauer, an executive analyst at “And slowly over the last two years, and increasingly over the next two years, there’s going to be more.”

Brauer believes the Twitter situation has led to less mainstream tolerance of any shortcomings at Tesla. He also thinks it’s possible that Musk’s actions are gaining him some new fans who might buy into the Tesla brand — but the overall effect still has been additional scrutiny at an inopportune time.

“The last thing he needs right now is a more critical eye being put on his company,” said Brauer. “Because there’s functional, actual reasons that he’s facing bigger challenges.”

Tesla’s stock fell 65% last year, making 2022 its worst year ever. The decline was more than triple the drop in the S&P 500, which slumped 19.4%, the Associated Press reported. And an analysis by Finbold noted that Tesla’s fourth-quarter market capitalization loss of some $436.3 billion was more than the total market cap of the company’s top 10 competitors.

Then on Tuesday, the losses extended after Tesla reported delivery and production numbers for 2022 that fell short of its own goal and Wall Street’s expectations. The EV maker reported record deliveries of 1.3 million vehicles globally last year, up 40% from the previous year, but below its own target of 50%. Fourth-quarter deliveries of 405,000 vehicles missed analysts’ expectations.

Aside from Musk’s handling of the Twitter acquisition, Tesla’s 2022 stock woes stem from macroeconomic trends — high inflation, rising interest rates and a possible recession, among others — that investors are concerned could weigh on Tesla in an increasingly competitive field.

The stock fell last month, for example, on a Reuters report that Tesla was planning to operate on a reduced production schedule at its plant in Shanghai this month, a signal to investors that demand was softening. Another such sign: Tesla offered customers in the U.S. rare, $7,500 discounts on some of the Model 3 and Model Y models as it raced to boost deliveries near year’s end.

“Tesla has a bullseye on its back,” said Ives. “And I think after what’s been a magic carpet ride for the last decade, there’s a Category 5 storm that Tesla is going through right now.”

Still, the outlook isn’t all doom and gloom. The market appears to still be bullish on Tesla’s long-term prospects, even as it takes note of near-term headwinds and stumbles. Goldman Sachs cut its price target on Tesla’s stock following the deliveries report, but maintained its buy rating.

Garrett Nelson, senior equity analyst at CFRA Research, in a December note predicted that Tesla will be the industry’s top-performing stock this year, and that the Model Y and Model 3 will remain the two bestselling EV models in the U.S.

“After a difficult second half of 2022, in which Tesla shares plummeted due to concerns related to slowing demand, inflation, increasing competition (particularly in China), and Elon Musk’s stock sales to fund the acquisition/operation of Twitter, we think shares will rebound sharply in 2023, aided by various developments that should return investor focus to underlying fundamentals,” Nelson wrote.

Analyst sentiment also is buoyed by the view that Tesla stands to reap the benefits of new government subsidies created by the Inflation Reduction Act. And there remains optimism around the long-awaited launch of Tesla’s planned Cybertruck.

Wedbush’s Ives maintains his outperform rating on Tesla’s stock. But wants to see Musk name a new Twitter CEO by the end of this month, for Musk to stop selling Tesla stock, and for Tesla to announce a more conservative growth target, among other steps.

“We remain long-term bullish and outperform on Tesla,” he and analyst John Katsingris wrote in a recent note, “although Musk MUST start to change direction here otherwise this situation could get even uglier.”

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