March 18, 2024
Last week, the S&P 500 started the week strong and with a 1% increase. Though before ending the week with a slight drop. A brief look at the past week’s performance showed who is gaining and who’s dropping in their market capitalisation. Tesla’s share price dropped by 9.88%, marking one of the largest declines. Is this EV giant in trouble? Let’s find out!
In fact, Tesla has taken a beating. The share price has declined a total of 20% from the slight retracement up from 5 Feb 2024.
Before we talk about Tesla, let’s talk about a recent news that potentially may affect Tesla investors.
Source: Fox Business
Who is Angela Chao and how is Tesla affected?
Angela Chao is the CEO of a shipping company, Foremost Group.The company deals with customers around the world including Fortune 500 and leading international companies. I’m not surprised that she has quite the reputation.
Here’s the full article about the incident: Click Here
The short story is this:
While doing a three-point turn, Chao is believed to have accidentally reversed her Tesla X into a pond.
As she was submerging, she called her friends for help. According to an expert in vehicle submersion, that was the wrong move to do. To exit safely, the driver only has one minute to get out of the vehicle. If the car is submerging, the best way is to open or break the window, but it’s challenging without a special tool.
In Chao’s case, calling for help could waste precious seconds needed to unbuckle your seatbelt and escape the car.
Will this news affect Tesla?
In this news, it was also shared that several Tesla owners also faced similar issues.
Source: Fox Business
How is this linked to investing?
As I was reading this unfortunate event, I was thinking “this is just like investing!”
When one buys a car, is it the responsibility of the driver or the company that manufactures the car to ensure they know how to drive it?
For me, it is the driver. Especially in the case where this “mistake” was frequently repeated.
When it comes to investing, some take it as a form of gambling. With a constant influx of information, some may choose the easy way out to just listen to other’s “recommendation” to buy or sell certain investment instruments.
Source: Quora
Equities, Options, ETFs, Bonds, CFDs, and Futures. These are the “Tesla” with a different gear stick. If one doesn’t know how to drive it, it can be quite dangerous.
Even for lower-risk and more diversified instruments like ETFs, it is still important to understand the underlying assets and know how it works.
This way, the short-term decline will just be an opportunity to grab more shares!
Now let’s get back to Tesla.
Tesla. So what happened?
When it comes to EVs (electric vehicles), there are just too many players. From EV-only companies like Tesla, Nio, Xpeng, and BYD to incumbent ICE (internal combustion engine) car brands like Mercedes, BMW, Nissan, Toyota, Volkswagon and the rest of them, everyone is going towards EV.
EV claims to be the solution to carbon emissions. But is it really the case?
Source: Visual Capitalist
While there are debates over how “Green” EVs actually are, let’s not forget that the business model of most car companies is mainly from the sales of cars.
With so many players and everyone attempting to sell more cars, the problem of oversupply of cars occurred.
In Tesla’s case, they were facing huge competition from China. Notably, their February sales dropped 19% as compared to the previous year. Not to mention that China is undergoing a state of deflation, where prices are getting cheaper, and the lack of consumption.
Source: Tesla
With car sales contributing to a high 80% of Tesla’s revenue, it is no wonder the oversupply and high concentration of car makers will ultimately affect the company’s performance.
Personal thoughts
While EV is a thematic trend that countries are adopting and building infrastructure, the “green-ness” is questionable. My rationale stems from the fact that while drivers no longer have to use fossil fuels to energize their cars, the electricity supplier will instead be in charge of burning fossil fuels or other means.
Cars will be cars. Be it fossil fuel-powered or electricity-powered. The business model requires constant sales and customers will likely only buy once every X years. With that, it is a good strategy for Tesla to have other segments like Energy Generation and storage, and Services and others.
If you are a Tesla investor and fan, do share your thoughts on why you are bullish long-term?
🌟🌟🌟 Hungry for more? Be part of our thriving community of like-minded individuals who are passionate about business and innovation. Join the conversation today and stay updated on the latest trends, strategies, and success stories in the world of investing. Don’t miss out on the opportunity to connect with fellow enthusiasts and continue exploring the limitless possibilities. Your journey to success starts with a single click! 🚀🌏
