Shares in electric car giant Tesla took a significant hit on Thursday, plummeting over 12% after the company issued a warning that its sales growth in 2024 might be notably lower than the previous year. The market response resulted in a staggering $80 billion (£63 billion) decline in Tesla’s stock market valuation.
Despite implementing price cuts to boost sales, Tesla, led by CEO Elon Musk, anticipates a challenging year ahead. The company’s annual earnings, disclosed on Wednesday, fell below Wall Street expectations, contributing to the downward trend in its stock value.
Tesla has been slashing prices in key markets worldwide, including Europe and China, in response to fierce competition from Chinese rivals like BYD and traditional automakers. Additionally, persistently high borrowing costs, driven by central banks maintaining elevated interest rates to combat inflation, have dampened demand for electric vehicles.
The electric carmaker cited price reductions, increased research and development spending, and expenses related to ramping up production of the new Cybertruck as factors affecting its profit margin. Tesla also indicated that it is in a transitional phase, preparing to commence production of a new lower-cost vehicle in the second half of the coming year.
Elon Musk, addressing investors, expressed concerns about Chinese competitors, stating that they could potentially “demolish most other car companies in the world” unless trade barriers are implemented. This cautionary statement follows BYD surpassing Tesla as the world’s top-selling electric carmaker in the final quarter of 2023.
The recent warning from Tesla about a slowdown marks a notable shift from years of robust growth, reflecting broader apprehensions about weakening global demand for electric vehicles. Year-to-date, Tesla shares have seen a decline of more than 25%.