Bloomberg News reports that the shares of Tesla Inc. are slated to wipe out almost one-fifth of their value in less than 14 days. It is occurring amidst surging fear that the demand for electric automobiles might be slacking.
When Did the Selloff Begin?
Earlier this month, the selloff started as the electric vehicle stalwart retreated in the growth forecasts during the period of the third earnings call. On close heels was the commentary of several automakers from across the globe aside from the analysts of Wall Street.
In the current week, Panasonic Holdings Corp., the battery manufacturer, and ON Semiconductor Corp., the chipmaker, rang alarms for the electric vehicle industry.
Impact of Warnings on Stocks
The stocks adversely impacted the stocks across the automobile sector in the United States. The automobile segment of the economy has been combating negotiations extensively about wages and the labor union.
Despite the above scenario, the decline of Tesla Inc. stands out from the crowd. As far as the shares are concerned, they have plunged by approximately 20% since the report of October 2018. This is in sharp contrast to a decline of 3.6%, as exhibited by the S&P 500 Index, and a drop of more than 4% in the NASDAQ 100. The slide in the stock prices of EV manufacturers has wiped out approximately $145 billion from market capitalization of the company.
As revealed by Morgan Stanley analyst Adam Jonas in a note, the problem revolves around a capital-intensive sector investing in strategies in the electric vehicle arena that have yet to be proven. Also, this scenario is occurring amidst escalating costs, lesser and slower demand, and lower costs.
Outlook for the Autos
Overall, the outlook for the auto sector is darkening as the escalating interest rates have pushed the cost of owning a car to soar. Other factors that have impacted the situation adversely include rising inflation. And the ability of consumers to afford purchases involving massive amounts, which has eventually become lean.
The electric vehicles, which operate on a comparatively newer technology than the traditional ones, operate in an underdeveloped ecosystem. As such, it is being hit first.
The stakes are high for Tesla. The company is a pure-play electric vehicle manufacturer and has an eye-watering valuation. Some of the share prices of the company imply that it is capable of making self-driving vehicles. But a lot depends on how the company can continue to rule at the top dominant position in the EV market and also maintain its profit margins.
