Tesla shares moved lower in early Wednesday trading and remain deeply in the red for the year, as investors looked to new data suggesting that the electric-car maker's challenges extend well beyond its current struggles in China.
Tesla (TSLA) shares have fallen nearly 25% this year, ceding more than $195 billion in market value, as investors pared back sales and profit forecasts amid slumping EV demand, intensifying competition in China and a global price war that is eating into the group's profit margins.
CEO Elon Musk's back-and-forth decision-making, which has included massive layoffs, immediate rehirings and veiled threats to purse his AI-focused ambitions beyond Tesla's corporate structure, have also weighed heavily on investor sentiment.
New data published by Bloomberg Wednesday, however, may have added another item to the expanding list of investor concerns.
Slumping European sales
Citing data from the European Automobile Manufacturers’ Association, Bloomberg noted that Tesla's Europe-based car registrations fell to 13,951 in April, a 2.3% decline from a year earlier and the lowest in 15 months.
More broadly, however, overall EV registrations rose 14% in April, suggesting Tesla-specific issues, and not industry demand, are holding back sales.
Tesla has closed its Berlin Gigafactory on at least two separate occasions this year, tied in part to supply-chain disruptions in the Red Sea and the impact of environmental protesters.
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Weakening sales in Europe also follow a disappointing start to the year in China, Tesla's most important market.
Data from the China Passenger Car Association earlier this month indicated that Tesla's April sales in China fell 18% from a year earlier to 62,167 units, down 30% from March.
Sales for its chief rival, Warren Buffett-backed BYD, (BYDDY) surged nearly 50% to 312,048 units.
The overall sales declines have compelled Tesla to launch the largest wave of layoffs in company history, Musk said the cuts would likely cull around 10% of the group's 140,000 global workforce.
Reuters has reported, however, that Musk wants that total to rise to 20%. The company recently delivered so-called WARN notices to hundreds of employees at Tesla facilities in California.
Morgan Stanley still bullish
All that said, Morgan Stanley's Adam Jonas, a longtime Tesla bull and one of the company's strongest advocates on Wall Street, reiterated his overweight rating on Tesla stock this week, arguing that "Elon needs Tesla more than ever before.”
Jonas said Musk's AI-related ambitions, tied to the host of companies he runs, will rely increasingly on lower-cost capital, which can come only from a successful Tesla performance.
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“In addition to the cost of capital, we believe on a fundamental level that the data, infrastructure built and path to monetization within Tesla is critical to Musk’s seemingly ‘adjacent’ AI efforts," Jonas wrote.
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Not all shareholders agree with that assessment, however, at least not at the level of compensation that Musk is currently seeking.
New York City Comptroller Brad Lander, alongside a pair of institutional investors, on May 21 published an open letter arguing that Musk's $55.8 billion pay package, to which the company agreed in 2018, is not in the company's best interests.
Shareholders will vote on the deal next month, in an effort to support an appeal to Delaware Chancery Court Judge Kathaleen McCormick's rejection of it last year.
"Shareholders should not pretend that this award has any kind of incentivizing effect — it does not," the letter read. "What it does have is an excessiveness problem, which has been glaringly apparent from the start."
Musk has said he needs both the deal and 25% control of Tesla shares in order to effectively lead the group. He says he'll pursue his AI and robotics ambitions outside the Tesla structure if he isn't able to secure that threshold.
Tesla shares were marked 2.8% lower in early Wednesday trading to change hands at $181.40 each. And although the stock has rallied 27% over the past month, it's still down 27% for the year.
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