Tesla is having a bad year, the company’s value will drop by almost 70% in 2022

Tesla’s share price has fallen drastically since the start of the year, especially due to the recent actions of its CEO, Elon Musk. However, the acquisition of Twitter alone cannot explain such a drop in capitalization.

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Shares in the electric car manufacturer Tesla hit a new 52-week low today only around $121 per share. As a reminder, Tesla’s stock peaked at the beginning of the year at $400, not far from the high it had reached a little earlier in 2021.

Over the course of a year, Tesla has therefore seen its market value fall by almost 70%. This decline had notably caused Elon Musk to temporarily lose his position as the richest man in the world when he had been replaced by Frenchman Bernard Arnaud, CEO of LVMH. So what explains such a decline in company value?

Tesla investors didn’t like the Twitter takeover

Since the announcement of Elon Musk’s takeover of Twitter, Tesla’s market value has only fallen. Musk sold billions of dollars of his Tesla stock to finance the Twitter takeover. Since taking over the company, Musk has periodically posted inflammatory tweets, which Tesla investors don’t really appreciate.

There is every reason to believe that his chaotic management style and increasing division of his time is having an impact on his other businesses. According to many Tesla employees, Elon Musk’s increasingly erratic behavior on Twitter is increasingly hurting the car company’s sales figures.

Sales of Tesla may disappoint in 2022

For a few weeks now, Investors are concerned that Tesla’s sales and earnings outlook is darkening. We were able to ascertain that the car manufacturer’s sales were falling at the end of the year.

Tesla stock market

Elon Musk’s company has nevertheless tried to make them rise again, particularly by offering more discounts for buyers who chose to deliver a vehicle before the end of the year. In Europe, Tesla has also sold its Model 3 and Model Y cars, which have been immediately available for delivery for a few days now. The company has also tried to boost sales and deliveries with offers 10,000 km of free charging in its Superchargers to customers who take delivery of their new Tesla in December.

The EV maker is due to release its fourth-quarter delivery and production numbers right after the New Year, and they could be disappointingalready warns Emmanuel Rosner, analyst at Deutsche Bank, in a new note to the client.

The US economy may enter a recession next year

Apart from the above reasons, the main reason behind Tesla’s share decline is the global economic situation. The Fed’s rate hike is especially painful for automakers, since their customers primarily buy cars with loans and leases. Monthly payments will therefore necessarily increase, as they generally follow the central banks’ interest rates.

The higher borrowing costs also increase the price of cars, meaning manufacturers have to lower prices to retain or attract more customers. Rate increases therefore tend to dampening demand and reducing carmakers’ earnings, which could weigh on their stock prices. Rather than investing in risky stocks, people therefore prefer to turn to safe assets such as savings accounts and government bonds.

After several years of inflation, the U.S. economy could enter a recession next year, which would hurt auto sales. Musk said Thursday in a conference call on Twitter that he expects the economy to be in “ severe recession in 2023.

I think there is a bigger macro-drama coming than people currently think “, he said, according to Reuters, adding that houses and cars will be” disproportionately affected according to economic conditions. He also added that he would not sell any more Tesla shares for the next two years.

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