You’re here (TSLA) has been a monster stock for much of its history, especially since its stratospheric run from mid-2019 to late 2021. But in 2022, Tesla stock has been a big loser, on course to plummet by 52% on November 22.
That would easily surpass 2016’s 11% plunge, the only other annual drop since Tesla stock went public in 2010. The sell-off has intensified, with the electric vehicle giant losing nearly half its value over the course of the last two months only. On Monday, TSLA stock slipped 6.8% to hit a new two-year low, the S&P 500’s worst performance for the session.
Here are some major headwinds facing TSLA stocks, from Elon Musk’s “Twitter circus” to Tesla’s demand issues.
Annual performance of Tesla stock
|Year||Variation in Tesla shares|
|2022 cumulative since the beginning of the year||-51.8%|
Covid concerns in China
Beijing is essentially on lockdown amid the city’s first Covid deaths in months. New restrictions were imposed in China on Tuesday as coronavirus cases hit unprecedented official highs.
Keeping a lid on the more infectious omicron variants will be extremely difficult, given that hundreds of millions of Chinese have yet to contract Covid.
And it comes after China eased restrictions slightly, raising hopes the country would withdraw its zero-Covid policy.
Renewed restrictions will further chill China’s struggling economy, reducing demand for electric vehicles, including those from Tesla, and increasing the risk of production disruptions.
China’s Covid woes are fueling concerns over demand for Tesla, in part due to a surge in production in Shanghai. Tesla has already slashed prices in China, but local media are reporting further cuts before the end of the year, but wait times are virtually nil. Tesla may be betting on a big quarter for European sales, but that could reduce backlogs by 2023.
On January 1, subsidies for electric vehicles end in China and Norway, with Germany significantly reducing subsidies. Sweden has just ended its subsidies for electric vehicles while the United Kingdom is ending its program. All of this could hurt Tesla EV demand and prices in Europe and China.
This comes as competition from electric vehicles in China intensifies, with more and more models such as BYD (BYDDF), Nio (NIO), Li-Auto (LI) and more on Tesla’s aging Model 3 and Model Y. The European market for electric vehicles is also increasingly crowded.
On the other hand, Tesla will be eligible for new US tax credits of up to $7,500 per vehicle. Tesla still faces far less competition in its home market than in Europe and China.
The Tesla Cybertruck is expected to start production next year, with Musk expecting an “early” release in mid-2023. But if the oft-delayed Cybertruck stays on schedule, volume deliveries might not begin until the end of the year or 2024.
Elon Musk’s Twitter Reign
Tesla CEO Elon Musk has owned Twitter for less than four weeks, but it already feels like an eternity. He cut the staff in half, and many other employees left. Over the weekend, Musk reinstated Donald Trump’s Twitter account, but then followed up with a vulgar meme directed at the former president. Advertising revenue is falling.
All of this has raised fears that Musk could damage his image. Even longtime TSLA bulls fear it will tarnish the Tesla brand.
Musk could also sell even more Tesla stock to pay Twitter’s bills. Musk has sold Tesla shares multiple times this year, citing Twitter as the reason for the two most recent lots.
TSLA stock tracks EV rivals and aggressive growth
Tesla stock is not doing well. But it’s not the only one. Aggressive stocks have had a terrible year in 2022. Tesla rivals in particular have struggled, including stocks Nio, Li Auto, Rivian (SHORE) and BYD. So by this metric, TSLA stock doesn’t look particularly bad during 2022. However, BYD is flat in November while Nio and Li Auto are up this month, while Tesla stock lost a quarter of its value.
More broadly, a bear market reigned for most of the year. Although major indexes have rebounded from October lows, they are still down significantly for the year, particularly the Nasdaq.
Please follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.
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