Tesla stock on track for its worst year ever as Elon Musk’s EV giant faces four major headwinds

Tesla (TSLA) has been a monster stock for much of its history, especially from its stratospheric run from mid-2019 to late 2021. But in 2022, Tesla stock was a big loser, on track to drop nearly 52% as of Nov. 21. 22.




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That would well surpass the 11% drop in 2016, the only other annual decline since Tesla stock went public in 2010. On Monday, TSLA shares fell 6.8% to a new two-year low, the S&P 500’s worst performance during the session.

Here are some key headwinds TSLA stock is facing, from Elon Musk’s “Twitter circus” to Tesla demand concerns.

Tesla Stock Annual Performance

Year Change Tesla shares
2010 56.6%
2011 6.7%
2012 18.9%
2013 343.8%
2014 47.9%
2015 7.9%
2016 -11.0%
2017 45.7%
2018 6.9%
2019 25.7%
2020 743.7%
2021 49.7%
2022 YTD -51.8%

China Covid concerns

Beijing is essentially on lockdown amid the city’s first Covid deaths in months. Further restrictions were imposed in China on Tuesday as the number of coronavirus cases rise to official record highs.

It will be extremely difficult to control the more contagious Omicron variants, as hundreds of millions of Chinese have not yet contracted Covid.

And that comes after China eased restrictions slightly, raising hopes that the country would pull back its zero-Covid policy.

Renewed restrictions will further cool China’s ailing economy, reducing demand for EVs, including Tesla’s, and raising the risk of production outages once again.


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Tesla question

China’s Covid woes are fueling demand concerns for Tesla, in part due to a large production ramp-up in Shanghai. Tesla has already cut prices in China, but there are local media reports of further cuts before the end of the year, but wait times are essentially zero. Tesla may be betting on a big quarter for European sales, but that could clear the backlog into 2023.

EV subsidies will end in China and Norway on January 1, with Germany cutting subsidies significantly. Sweden has just ended its EV subsidies, while the UK is ending its programme. All of that could hurt Tesla EV demand and prices in Europe and China.

That comes as EV competition heats up in China, with more and more models from the likes of BYD (BYDDF), Nio (NIO), li car (LI) and more take on Tesla’s aging Model 3 and Model Y. The European EV market is also getting busier.

On the other hand, Tesla is eligible for new US tax credits of up to $7,500 per vehicle. Tesla still faces much less competition in its home market than in Europe and China.

The Tesla Cybertruck is expected to begin production next year, with Musk expecting “early” production in mid-2023. But if the oft-delayed Cybertruck stays on schedule, volume deliveries may not begin until the end of the year or as late as 2024.


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Twitter government of Elon Musk

Elon Musk, CEO of Tesla, has owned Twitter for less than four weeks, but it seems like ages. He has halved the staff, while many other employees are leaving. Over the weekend, Musk restored Donald Trump’s Twitter account, but followed up with a vulgar meme directed at the former president. Advertising revenues are declining.

All of that has led to concerns that Musk is hurting his image. Even old TSLA bulls fear this could tarnish Tesla’s brand.

Musk may also sell even more Tesla stock to pay Twitter’s bills. Musk has sold Tesla stock several times this year, citing Twitter as the reason for the two most recent batches.

TSLA stock follows EV rivals, aggressive growth

Tesla stock is not doing well. But it’s not alone. Aggressive stocks have had a terrible 2022. Tesla’s EV rivals in particular are struggling, including Nio stock, Li Auto, Rivian (RIVN) and BYD. So by that measure, TSLA stock doesn’t look particularly bad going into 2022. However, BYD is flat in November, while Nio and Li Auto are up this month, while Tesla’s stock has lost a quarter of its value.

More generally, a bear market reigned for most of the year. While major indices have bounced back from October lows, they are still down significantly this year, especially the Nasdaq.

Follow Ed Carson on Twitter at @IBD_ECarson for stock market updates and more.

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