Tesla’s 25% Sell-Off

By Douglas A. McIntyre Published Apr 10, 10:41AM EDT

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Tesla’s 25% Sell-Off — © 2018 Getty Images / Getty Images News via Getty Images

Tesla’s (NASDAQ: TSLA | TSLA Price Prediction) stock is down 24% this year against a flat S&P. This is worse than Microsoft (NASDAQ: MSFT), which is in the AI doghouse–down 23%.

The reason for the crater is also AI.

Tesla’s Q1 deliveries rose 6% to 358,023. This was shy of expectations. Production reached 408,386. This caused concern that Tesla had a backlog of vehicles and, thus, a demand problem. If so, how will it clear these vehicles off its lots? The answer may be on Tesla’s website, where it offers 0% APR financing. These are usually used in the automotive industry for vehicles with inventory issues.

And, no matter what CEO Elon Musk says about Tesla’s future. It is still a car company, operating in a tough EV market. In the fourth quarter last year, “automotive” revenue was 71% of total.

Musk’s hurdle today is that many people have stopped giving him the benefit of the doubt. Tesla operates in a huge swamp of competition in China, a cutthroat market where many EV companies are offering special features and discounts just to stay afloat. That is Tesla’s trouble in the world’s largest EV market.

In the US, companies that sell EVs face two problems. The first is that when the federal EV tax credit of $7,500 expired last September 30, EV sales collapsed. The other is that there is a flood of EVs onto the market. Many of these are on the market because of the end of their leases. This flood has driven prices down enough that people consider them new EV alternatives. Tesla sells used EVs at its own site.

Tesla’s move into AI was reflected in its efforts to have a truly autonomous vehicle. It has been in limbo for some time. Regulators are combing through whether these are dangerous, or at least not safe enough to let onto the roads. Tesla’s Robotaxi can’t exit that position, and neither can its competition, led by Google’s Waymo.

Musk wants investors to believe that Tesla is a robotics company. Its lead product in the sector is the Optimus humanoid robot. Musk says everyone in the world will have a robot. So far, that claim has fallen on deaf ears.

Tesla’s stock is down 25% this year because the market is not buying what Musk has to sell. He is better off in the rocket business.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.