Tesla Inc., the electric vehicle powerhouse, has reported a loss of more than $94 billion in market valuation in the first two weeks of 2024. This marks the company’s worst start to any year since it went public in 2010. The unexpected downturn follows the company’s blockbuster performance in 2023 when its shares more than doubled.

The decline in Tesla’s market capitalization is due to a series of negative news that has hit the Austin, Texas-based EV maker. Firstly, Hertz Global Holdings Inc., a car rental giant, made an unexpected U-turn on EVs. Secondly, Tesla announced yet another price cut for its cars made in China. Lastly, there are signs of rising labor costs. These factors have all contributed to a slowdown in the growth of demand for EVs, particularly in the US.

“Stagnating growth is the main concern investors have with Tesla,” says Cowen analyst Jeffrey Osborne. “The price cuts in China are exacerbating these concerns as it appears to be a race to the bottom for the EV industry given the intense competition.”

Furthermore, Tesla’s aggressive price cuts, which began in early 2023 to boost demand, have resulted in a steady erosion of its profit margin. In Q3, Tesla’s automotive gross margin ex-regulatory credits fell from 27.9% to 16.3%. The pressure continues to mount as production workers at Tesla’s US plants receive pay raises.

Additional challenges include rerouting shipments destined for its Berlin plant due to Western military actions and security concerns in the Red Sea. Production at the Berlin plant will also be suspended from Jan. 29 to Feb. 11.

Despite exceeding analysts’ expectations for Q4 delivery numbers, Tesla now lags behind China’s BYD Co. in global electric-car sales. This shift has led to a significant blow for Tesla investors. Last year, the company was the eighth-best performer in the S&P 500, but so far in 2024, it’s the eighth worst.

CEO Elon Musk, who was the world’s richest person in 2023, has seen his net worth decrease by $23 billion this year. His wealth primarily comes from his 13% stake in Tesla and about 304 million exercisable stock options. He also owns approximately 42% of SpaceX, valued at about $53 billion. Now, Jeff Bezos is quickly closing in on Musk’s top spot in the Bloomberg Billionaires Index, with $179 billion to Musk’s $206 billion as of Friday’s close.

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