Tesla Takes Action to Tackle Demand Slump, Stock Continues Slide

Monday saw a little decline in Tesla (TSLA) stock as the automaker announced another round of price reductions in the US, adding to concerns about the state of EV demand as we go into the first few months of the year.

With a decline in demand, declining profit margins, and headline risks associated with CEO Elon Musk, investors are continuing to reprice the so-called Magnificent 7 tech giants, and Tesla is by far the worst-performing stock among them, with more than $200 billion in value lost in the last six months.

In reality, the organization itself alluded to impending layoffs in the United States last week in the midst of rumors that managers had been requested to conduct a "binary" evaluation of all functions inside the firm and that some employees' performance assessments had been canceled.

Over the last three months of 2018, Tesla reported 485,000 deliveries; nonetheless, the company's profits were significantly impacted by declining demand, a string of price reductions, expenditures associated with artificial intelligence programs, and the delayed Cybertruck.

In the fourth quarter of 2023, Tesla's profit margins, which Wall Street analysts likely monitor the most, fell to 17.6%. This contrasts with experts' expectations of around 18.3% and a 23.8% margin during the same time in 2022.

The association cautioned that growth rates for car deliveries in 2024 would be "notably lower" than those in 2023.

Meanwhile, reports on Monday indicate that Tesla is temporarily lowering the price of certain of its Model Y vehicles in the United States, mirroring such actions taken in China before to the Lunar New Year break.

The long-range and rear-wheel drive Model Ys from Tesla now have $1,000 less in price, at $42,990 and $47,990, respectively. These reductions are good through the end of this month.

"The essential quandary of manufacturing: Factories need continuous production for efficiency, but consumer demand is seasonal," according to Musk, is what the cuts are an attempt to address.

Musk's Diversions and Tesla Investors' Concerns

The fact that Musk, who oversees at least four significant businesses in addition to the automaker, is awaiting a decision from the U.S. government, raises the number of possible diversions for Tesla investors. Judge Laurel Beeler, a magistrate, mandated that the billionaire provide an in-person testimony before a U.S. Investigating his $44 billion acquisition of Twitter is the Securities and Exchange Commission.

Musk has so far declined to assist with the SEC's inquiry into whether he complied with securities laws when he declared his intention to purchase the social media network in the spring of 2022. Musk concluded the Twitter sale in late 2022 before rebranding the microblogging site X.

Musk has also been quite open about his longer-term goals for Tesla and how AI technology will be used by the company.

After selling a significant number of shares to finance his acquisition of Twitter in 2022, Musk today holds around 13% of Tesla. Last month, he said that he would have to develop his AI and robotics vision outside of the Tesla framework unless he could obtain at least a 25% voting interest.