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A Look at a Bad 2022 for Elon Musk's EV Company

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After a tumultuous year in which its CEO, Elon Musk, acquired Twitter, electric vehicle company Tesla (TSLA) is looking forward to the end of 2022.

The stock had its worst annual performance this year, losing nearly 70% of its value. Wall Street analysts attributed much of the drop to Musk’s volatile behavior.

Here’s a look at Tesla’s tough year.

A promising start to the year

During the pandemic, Tesla shares soared.

As of February 2020, Tesla is trading at $60 per share. By the first day of trading in 2022, it had risen to nearly $400 a share, although the stock has subsequently dropped under pressure.

Overall, the first quarter of 2022 was profitable for Tesla. Its operating margin reached a record 19% and the company delivered more than 300,000 cars. When inflation and global supply chain concerns began to affect the company, Tesla responded with several price increases on its products, and the stock recovered.

More relief from the bear market came in late March, when Tesla unveiled a new gigafactory in Berlin, Germany. That brought hope at a time when China, the world’s biggest EV market, has begun to see a resurgence in COVID cases, and shares jumped to $381 on April 4.

Also in April, Musk made a bid to buy social media platform Twitter for $54.20 a share. Tesla’s stock would soon suffer.

Tesla CEO Elon Musk speaks during the official opening of Tesla's new factory on March 22, 2022 near Gruenheide, Germany.  (Photo by Christian Marquardt - Pool/Getty Images)

Tesla CEO Elon Musk speaks during the official opening of Tesla’s new factory on March 22, 2022 near Gruenheide, Germany. (Photo by Christian Marquardt – Pool/Getty Images)

Developments in China and the Twitter Saga

With nearly 8% share of the country’s electric vehicle market, Tesla has revamped China’s electric car market with its largest gigafactory in Shanghai, which has produced more than a million cars since opening in 2019.

Sales in China made up about a quarter of Tesla’s global sales (about $14 billion in 2021).

China has one of the lowest direct investment openness levels in the world, according to the Atlantic Council and Statista. It has always required foreign companies to partner with domestic Chinese companies to operate in China.

But in 2018, Tesla became the exception. Musk has reached an agreement with local authorities for the company to own the Shanghai gigafactory with a 10% cut in corporate income tax, according to Tesla’s SEC filings.

Tesla’s footprint in China helped Musk at one point become the richest person in the world (a title he relinquished later this year). But COVID soon got in the way. Shanghai was locked down, halting production of electric vehicles. In April alone, Tesla’s production in China fell by nearly 80%.

Meanwhile, Musk – a market mover in the crypto world – revealed that Tesla held $2 billion worth of bitcoin, which Wedbush analyst Dan Ives called a “distraction and sideshow” in an interview with Yahoo Finance.

The Tesla logo and the silhouette of Elon Musk are seen in this illustration taken on December 19, 2022. REUTERS/Dado Ruvic/Illustration

The Tesla logo and the silhouette of Elon Musk are seen in this illustration taken on December 19, 2022. REUTERS/Dado Ruvic/Illustration

Musk’s “distractions” multiplied. He needed money to become the owner of Twitter and started selling Tesla shares in April. He sold $8.4 billion worth of shares in less than a week, followed by another $4.4 billion two days later. Tesla investors were disappointed that the shares were being used to fund Musk’s purchase, which sent the stock further down.

After the sales were announced, Musk tweeted: “No more TSLA sales planned after today.”

The second quarter was even more damaging for Tesla stock. On May 24, the stock hit its lowest level of the quarter at $209 per share.

The difficult quarter has put Tesla’s public image under scrutiny and stock uncertainty has increased further. In June, mass layoffs in Nevada resulted in a lawsuit against the company for violating federal law by failing to provide advance notice of job cuts.

Meanwhile, Musk continued selling assets. He sold 75% of Tesla’s bitcoin in July for regular money, which at the time of purchase Musk had declared that he would not sell.

The stock again entered a choppy zone. When Musk called to cancel the deal with Twitter, Twitter sued and Musk eventually went ahead with his purchase. Still, long-term relief for Tesla was nowhere in sight.

the final showdown

By the end of July, Tesla stock appeared to be recovering.

With Shanghai reopening, annual sales expectations hit 6 million, above previous estimates, as the CEO of Hertz (HTZ) told Yahoo Finance that demand for rentals was “very, very solid”.

But supply was not up to par, and production outages became the norm for Tesla. In July, sales slumped in China due to factory closures yet again, this time for an upgrade of factory lines.

Then Musk sold 7.29 million Tesla shares, helping the stock drop by 2% that day.

In an effort to stabilize the stock over the long term, Tesla’s board of directors wanted to perform a 3:1 stock split, which would increase the number of shares, generate interest from retail investors and make the stock more affordable for investors. medium. While stock splits do not affect a company’s market value, they can increase share prices as more shares are purchased; however, this did not happen in Tesla’s case.

October brought more COVID outbreaks and China locked down once again. In the same month, Tesla lost third-quarter earnings, although Musk declared that the company had “excellent demand for the fourth quarter”.

“Factories are running at full speed and we’re delivering every car we make and keeping operating margins strong,” Musk said on Tesla’s earnings call.

He also closed the deal with Twitter for the original price of $44 billion, which set off a series of layoffs, lawsuits, and countless shenanigans that changed Twitter’s structure. Some analysts argued that Musk got “quite distracted” by Twitter, adding to Tesla’s chaotic year.

“In what has been a dark comedy show with Twitter, Musk has basically smeared Tesla’s history/actions and is starting to potentially impact the Tesla brand with this ongoing Twitter debacle,” wrote Dan Ives, senior analyst at Wedbush. , in a November note. .

Finally, December put Tesla in the eye of the storm. The gigafactory in Berlin descended into “total chaos” due to personnel problems. And while the US EV market heavily favors Tesla — with around 65% market share, according to data from S&P Global Mobility — the competition is winning. In late November, S&P estimated that Tesla could fall to 20% of the market by 2025.

The Tesla logo displayed on a phone screen and Elon Musk's Twitter account displayed on a background screen are seen in this illustrative photo taken in Poland on April 24, 2022. (Photo illustration by Jakub Porzycki/NurPhoto via Getty Images )

The Tesla logo displayed on a phone screen and Elon Musk’s Twitter account displayed on a background screen are seen in this illustrative photo taken in Poland on April 24, 2022. (Photo illustration by Jakub Porzycki/NurPhoto via Getty Images )

Meanwhile, the weekly turmoil on the new version of Twitter continued as Musk asked users whether he should step down as CEO.

And Tesla’s stock has become increasingly volatile. Oppenheimer downgraded Tesla shares to a new low after falling about 70% year-to-date. The stock continued to fall to its lowest price in years.

“Don’t worry too much about the stock market madness,” Musk told Tesla employees in an effort to boost morale. “As we demonstrate continued excellent performance, the market will recognize that.”

Some Tesla bulls believe the stock could rise next year, even after it was one of the worst performing stocks of 2022.

However, critics believe that Musk has damaged Tesla’s brand image with his investment in Twitter and the prospects for Tesla in early 2023 don’t look much better.

The company has announced a hiring freeze with layoffs in the first quarter of 2023. The Shanghai factory faces questions over whether it will remain the cornerstone of Tesla’s production, as it will not reopen in January for full-scale production.

As for selling shares, Musk said that with a “late” recession, he won’t be selling any more Tesla shares for the next year and a half. But he broke that promise before.

Tanya is a data reporter for Yahoo Finance.

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