Tesla's woes are reminiscent of BlackBerry (BBRY).
Dec 12, 2022| Tesla's woes are reminiscent of BlackBerry (BBRY). For years, blackberry was also the darling of a new market (mobile phones), until it was phased out. Blackberry failed to sustain investment in new product innovation and ignored booming market trends until it was overtaken by competitors. In the end, blackberry never regained its former glory.
With no new models, I expect Tesla's incremental delivery growth to end this year as the last market expansion of its most recent vehicle, the Model Y, begins to slow. If so, slowing revenue growth and shrinking margins will frustrate investors' expectations of continued explosive growth. To be sure, Tesla's year-to-date performance has been weaker than the market expected, particularly in the third quarter. While Tesla has cut prices and increased incentives, deliveries have fallen short.
At nearly $600bn, Tesla is still worth two to three times as much as its biggest rivals combined, even though it accounts for only 2-3 percent of global sales. But with Tesla's dominant position in the electric car market waning, and with aggressive competitors' models outpacing its outdated models, it's clear that Tesla has further to fall.
Tesla's gloomy outlook has already taken a heavy toll on its share price. Tesla shares had come under intense pressure from expectations that Mr. Musk would be forced to sell more Tesla shares to complete the Twitter deal and that the Twitter acquisition would distract him from running Tesla. Tesla shares have fallen more than 50 percent this year, wiping nearly $700bn off its market value (from a peak in late 2021).
We'll soon find out whether Tesla's current healthy financial position will deteriorate after the stock market takes a hit. Twitter might not survive without Tesla's transfusion. Saving Twitter won't kill Tesla in the short term, but it will certainly drain Tesla's ability to tackle the toughest challenges ahead.
