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  • Writer's pictureSylvain Tornare

Is It The End For Tesla?

Updated: Feb 4, 2023

Tesla is known for its innovative products and as the underdog of the car market. However, the American brand has lost nearly 70% of its market value since its peak at the end of 2021, making Elon Musk the first person to ever lose over 200 billion dollars. What factors have led to this collapse, and what does the future hold for Tesla?

Carequest Car broker Switzerland_Elon Musk and Tesla

The development of the automotive market and the current economic downturn have put Tesla in a difficult situation. In addition to macroeconomic factors over which Tesla has little influence, internal problems have pushed the US company into an uncomfortable situation. Let's find out why this has happened and what it means for its future.


Internal factors

Broken promises

Tesla has failed to deliver on some of its commitments. Elon Musk is known for his controversial announcements. Several products have been delayed despite announcements that they would go into production. This is the case for the Cybertruck and the Tesla Roadster. In addition, a fully autonomous model should have been launched before 2020. In 2023, this model is still not on the market. In the meantime, other brands have released similar products. This lack of reliability has damaged the confidence of buyers and investors.


Elon Musk

Many consider Tesla's CEO a visionary. However, his actions over the past few months and the Twitter saga have damaged his reputation. As Tesla is still strongly associated with Elon Musk, its brand image has taken a hit.


Lack of innovation

Tesla's product range is ageing. The US company has long been seen as a technology company rather than a car company. For many years, the brand's innovative credentials justified this view. The American firm was the first to offer the Auto Pilot, the autonomy of its products was superior and their performance unbeatable. Although its products are still competitive and Tesla is still ahead of its competitors in some aspects, a lack of innovation is beginning to be felt. As a result, competing manufacturers have moved closer to Tesla. Today, other players in the automotive market are able to offer comparable products, and in some cases even more attractive ones. As a result, the market share of the American giant is shrinking.


External factors

Interest rates

Interest rates have increased significantly recently. As a result, asset financing has become significantly more expensive. As Tesla is a technology brand, its customer pool is potentially younger than that of other more established and conservative brands. This customer base often has fewer financial means and therefore tends to finance expensive goods such as cars. This group is particularly affected by rising interest rates and may reduce their consumption.


Stock market and financial markets

The stock market and other financial markets are doing rather badly. Thus, people who made large gains have partially lost them. The funds available are smaller, and their consumption is correspondingly lower. In addition, the insecurity causes the population to become more cautious with a preference for a larger financial reserve. Finally, the general decline of the markets partly explains the loss in value of Tesla shares.


Politics

The subsidies for the purchase of green vehicles are temporary. Electric cars are subsidised by the state in many countries to accelerate the energy transition. However, this strategy implies a cost and a significant loss of revenue for the administration. As a result, these incentives cannot be sustained indefinitely. Some politicians have already decided to reduce them. The end of subsidies means higher prices and running costs for users. Also, some of the boundaries of eligibility for subsidies are constantly being lowered, forcing manufacturers to reduce their prices, thus potentially decreasing their margins.


Energy crisis

Some regions of the world are facing shortages, particularly in terms of electricity production. This has resulted in significant price increases. These, combined with relatively low petrol prices, make electric vehicles slightly less attractive and, to some extent, controversial. For more information on this subject, we recommend our article.

Carequest Car broker Switzerland_Tesla Model 3 charging

Conclusion

Tesla never stops surprising us, for the better or the worse. Its ability to innovate, and its different approach, have led to its success over the last decade. However, its ageing products combined with unreliability and unfavourable macroeconomic conditions have hurt the American firm. Thanks to heavy investments, competitors have been catching up, thus reducing the competitive advantage of the transatlantic pioneer.


Is this the end of Tesla?

Its products are still competitive and its technological knowledge still gives it a competitive edge. However, a renewal of its range and a critical review of its communication strategy should be necessary in the next few years. It is not excluded that its business model will evolve, perhaps in a similar way to Rimac...


For more information on electric vehicles, contact us!


 

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