April 27, 2024 09:01
On April 19, for the first time in more than a year, the stock market value of the oil giant Exxon Mobil exceeded that of Tesla, writes Bloomberg. The car manufacturer has been recording a sharp slowdown in sales of its electric vehicles for some time: in the first quarter of 2024 they fell by 9 percent, the largest drop since 2012, while profits fell by as much as 55 percent. Furthermore, since the beginning of the year, Tesla has lost 40 percent of its value on the stock market (the worst result among the five hundred main companies listed in the United States). Furthermore, the company also decided to lay off 10 percent of its employees. Exxon’s crude oil production, on the other hand, benefits from an increasingly high demand for oil and has started to grow again thanks to the exploitation of the rich deposits of Guyana, in South America, and the Permian basin, in the United States.
The overtaking of a company like Exxon, symbol of everything that the ecological transition seeks to leave behind, is a further demonstration of how the process of electrification of means of transport, considered fundamental in the fight against the climate crisis, is proving much more difficult than expected. All the players in the automotive industry are having problems: Ford, for example, has decided to postpone the production of electric SUVs and trucks, to focus on offering hybrid models.
But the case of Tesla is the most sensational, both because the dimensions of the slowdown are impressive (in November 2021 its stock market value was over one trillion dollars, up 2,000 percent in two years, while today it has fallen to 469 billion, just below Exxon’s 475 billion) and because the company founded by Elon Musk is the symbol of the electric car, it was the first manufacturer capable of demonstrating that the turning point was not a utopia. Ultimately, it is thanks to Tesla that, despite everything, at the end of 2023 in 31 countries electric car sales constituted at least 5 percent of the total, a share that according to experts indicates the threshold of mass adoption of a technology (at the end of 2022 there were 19 countries).
Why has Tesla stopped achieving the extraordinary results it had accustomed everyone to in recent years? For the first time, investors are no longer wondering whether the company “will be able to produce enough vehicles, but whether people will buy them,” writes the Wall Street Journal. The causes that weaken confidence in the present and above all in the future of the company are various, observes the US newspaper: motorists’ enthusiasm for electric vehicles seems to have cooled; Tesla is unable to offer innovative models on the one hand and cars at prices accessible to the general public on the other; many of Musk’s futuristic projects (especially self-driving vehicles) are struggling to materialize.
But probably the factor that has had the greatest influence is Chinese competition, which has accelerated production for some time and is slowly imposing itself on all markets with technologically advanced and affordable models. In 2023, BYD, the main electric car brand in the Asian country, has displaced Tesla as world leader in terms of sales volume. All this has sparked a fierce race to the bottom of prices. The US company began already in 2022 by reducing the price of its models in the United States by $3,750; then $7,500 plus ten thousand miles of free battery charging. In January 2023 prices were in some cases discounted by 20 percent. These measures, explains the Wall Street Journal, strengthened sales only for a limited period: “In the first six months of 2023, Tesla prices fell by an average of 12 percent worldwide and sales rose by 19 percent. hundred. But in the second half of the year, even though the company continued to apply discounts and offer incentives, the pace of sales growth slowed to 3 percent.”
On April 23, at the presentation of the results for the first quarter of 2024, Musk tried to reassure investors, claiming that Tesla will soon launch new models and, above all, that vehicles with more accessible prices will finally arrive in 2025. On the stock market the stock immediately gained 13 percent, but to many observers the CEO’s words seemed like a rather vague commitment, which among other things will not be easy to keep. Tesla’s readjustment towards values closer to reality could therefore continue in the coming months. A completely natural evolution for a pioneer company that is evaluated not only on its results but above all on the disruptive potential of its technology.
In some ways, what Sergio Marchionne, the manager who passed away in 2018 and at the time CEO of Fiat Chrysler, predicted in 2015 is coming true: “I think Musk is doing a great job,” said Marchionne. “I’ll just tell you one thing: There is not a car company in the world in the top 7, and I include myself in this group, that could not have done what Musk did. The problem is, we didn’t. Now I could give you a bunch of reasons why we didn’t do it as well as he did, Musk did an amazing job. In my opinion, his rating is off the charts. Unless you think he has a trick up his sleeve, I think his competitive advantage will erode over time. If he looks at the long-term sustainability and stability of profits, I don’t see it.”
This text is taken from the Economica newsletter.
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