The same thing is happening to Tesla as to the car that Cinderella used to get to the ball.
He set a record value on the stock market of 1.2 trillion dollars a little over a year ago.
At the time, with a 1% share of the global auto market, the company was worth more than all the other listed automakers combined, those who account for almost all of the other 99% of the market: Toyota, Volkswagen, Daimler, General Motors, BMW, Stellantis, Ford, Ferrari, Hyundai, Nissan... He rubbed shoulders only with the big tech companies (Apple, Microsoft, Alphabet, Amazon).
A year later, the bubble has been burst.
While its boss and first shareholder, Elon Musk, was entangled in the purchase of Twitter, Tesla has lost more than 70% of its value.
It has suffered from the slowdown in the economy, the outbreak of the pandemic in China and the growing competition, but, above all,
investors have stopped seeing the company as a technology company.
It is, after all, a car manufacturer.
Tesla sinks on the stock market after missing its sales target and analyst forecasts
The latest disappointment has come with the sales figures for the fourth quarter.
Until now, Tesla's biggest problem was that he couldn't make as many cars as his customers demanded.
However, the eternal waiting lists have passed into history.
The latest published figures show that undelivered stocks are piling up.
The company attributes it to an increase in vehicles in transit from factories, but it sounds like bad salesman excuses.
Tesla produced 439,701 vehicles and delivered 405,278 in the fourth quarter of 2022, well short of targets and expectations.
He has been manufacturing more cars for three quarters than he is capable of selling.
The company has launched to offer deep discounts, although this has provoked the anger of recent buyers, especially in China, where they have gone to protest dealers.
Tesla is a story of success and growth.
Investors pay for their future, more than for their present.
Today, the Volkswagen group, for example, triples its sales and achieves higher profits, and is only worth a fifth of that of the electric car manufacturer.
The reason is its growth rate, its higher margins and its huge potential market.
The question is how much of that market Tesla will be able to corner.
Goldman Sachs analysts believe the electric car market will grow strongly and that Tesla is better placed than other competitors to take advantage of that boom and defend margins through cost-cutting measures, but they also list a number of threats. : “The main downside risks of our thesis are related to the pace of adoption of electric vehicles, the demand for cars, the increase in competition in electric vehicles, the automobile cycle, the autonomous car, the risk of key person, internal control environment, and operational risks associated with Tesla's high degree of vertical integration."
What Goldman calls "key person risk" is an undisguised reference to Elon Musk.
The first Tesla executive has spent 2022 entangled in the purchase of Twitter, first, and in the chaotic management of the social network, later.
Musk has gone from being seen by many as a visionary genius to an unsympathetic tyrant.
In addition, he has aligned himself with right-wing positions and has openly called for the Republican vote in the United States, which has caused Tesla's approval rating among Democratic voters to fall more than 20 points, according to a recent Morning Consult poll. .
It seems like a bad deal, considering that former President Donald Trump and Republicans scoff at the electric car while progressives are its main customers.
“The biggest risk the company has is its founder, Elon Musk,
The competition accelerates
Arenillas concedes that Tesla "has had a great impact on the automotive industry."
“It has been the biggest contributor to popularizing electric vehicles, breaking the monopoly of the combustion engine and forcing the incumbents to react,” he adds.
But growing competition from traditional manufacturers has become a major threat.
Experts believe that Tesla will be unable to defend the very high market share it enjoys.
The example of the United States is obvious.
It has gone from accounting for 79% of electric car sales in 2020 to 65% in 2022, and S&P Global analysts estimate that its share will fall to 20% in 2025. "Tesla's position is changing as new more affordable options, offering the same or better technology and manufacturing.
With consumer choice and interest in electric vehicles increasing, Tesla's ability to maintain a dominant market share will be threatened in the future," the firm said in a recent report.
“As new electric vehicles arrive, the loyalty” of Tesla customers will be tested, he adds.
That is a big difference with big tech.
Google, Amazon, Microsoft and Apple have been able to corner markets and defend huge market shares with huge margins.
Tesla would justify a trillion-dollar valuation if it were able to corner the car market of the future, but it doesn't seem to have a sustainable competitive advantage to do so, not in the cars themselves, not in batteries, not in autonomous driving.
The auto market is more likely to remain highly fragmented, as with traditional cars, and even if Tesla occupies a privileged position, it will hardly be dominant enough to pay such a huge valuation premium.
Arenillas admits that "Tesla has a very different vertical integration model from the rest of the players with some benefits: better control of the technology (they manufacture their own semiconductors and their autonomous driving system), better customer control (direct distribution instead of through intermediaries) and better cost control (manufacturing in large gigafactories)”.
However, he qualifies that "the business model has not been tested on a scale in a recession, where vertical integration can lead to a deterioration in margins due to the high level of internal costs."
Citi analysts explain that if you subscribe to the view that the car of the future introduces relevant new markets, "traditional valuation methods become somewhat less applicable, as long as the balance sheet remains strong," versus a value approach. terminal or long term.
But that method “injects much greater potential volatility” into the valuation.
Tesla becomes a bet on the future.
"There are too many unknowns to make a reasonable assessment," summarizes Arenillas.
Tesla presents results on January 25.
More than the figures, investors anxiously await the words of Elon Musk in the conference with analysts.
Meanwhile, he has spoken on Twitter about the Tesla collapse: “Long-term fundamentals are extremely strong.
Short-term market madness is unpredictable.”