Tesla (TSLA) is scheduled to report second-quarter earnings on July 19. It’s a nervous event for investors and analysts who have witnessed the electric carmaker’s share price soar 168 percent this year but are increasingly concerned about the company’s actual business prospects. In parallel with its stock boom, Tesla is facing shrinking profit margins and rising competition. And CEO Elon Musk’s erratic management style complicates things more.
In an investor survey conducted last week (from July 10 to July 14) by Bloomberg, a quarter of more than 600 respondents flagged Musk as the biggest risk for Tesla in the next two years. Many are concerned about the CEO’s overly divided attention at his other companies, including Twitter, SpaceX, Neuralink, the Boring Co. and the newly launched artificial intelligence startup, xAI.
“Musk is such an unpredictable person. He could buy another company tomorrow, he could tweet something that turns out to be a major mistake,” Matthew Tuttle, CEO of Tuttle Capital Management, a Greenwich, Conn.-based investment advisory firm, told Observer.
“That works both ways,” Tuttle added. “I believe TSLA trades at a premium because of him as well. So I look at him as both a major risk and a major asset. If you are a TSLA shareholder, you hope he doesn’t screw something up. So in that regard I do think he is a major risk.”
Tesla is currently valued at $907 billion, more than the world’s next nine most valuable carmakers combined. Much of Tesla’s giant market cap is tied to not electric cars, but the prospect that it will dominate many other auto-related industries, such as self-driving, charging and robotics. Musk loves to make lofty promises about Tesla’s new products, but his track record suggests these things often materialize much later than he promises, if at all.
Competitors are closing in on Tesla
Among Tesla investors, a much more urgent concern is growing competition in the EV field. In Bloomberg’s survey, more than half of respondents said rivals are Tesla’s biggest risk in the next two years.
About two-thirds of survey participants said Musk should focus more on Tesla to fend off competitors. And 63 percent believe Tesla will continue lowering prices to boost sales, which could further damage its already strained profit margins.
Earlier this month, Tesla disclosed that it delivered 466,140 electric cars globally in the second quarter—a record high. But it’s unclear how profitable those sales were because Tesla lowered prices for its EVs multiple times in the first half of 2023.
Meanwhile, BYD, Tesla’s largest competitor in China, also reported record global sales for the second quarter. (BYD doesn’t sell EVs in the U.S. yet) And General Motors doubled the sales of its Bolt electric car in the U.S.