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Tesla stock seems poised to drop further due to increased EV competition and Musk’s recent involvement with Twitter.
According to investors, Tesla stock (NASDAQ: TSLA) is at risk of plunging further due to a number of factors. These include the blowback from CEO Elon Musk’s Twitter antics and cheaper competition in the US from other electric vehicle brands. The EV company’s stock has already endured a brutal stretch caused by a tech decline, and bears worry that it has dropped enough.
Bernstein analyst Toni Sacconaghi recently said the Tesla stock risk/reward equation remains balanced at current levels. However, data firm S&P Global Mobility forecasts that the EV manufacturer’s market share will fall to less than 20% by 2025.
Tesla Stock to Slide Due To Saturation in EV Playing Field
Tesla remains the most dominant EV brand in the United States, but this industrial hegemony is eroding thanks to more affordable models. On Tuesday, S&P Global Mobility stated that Tesla rivals offer an increasing number of cheaper options to the Austin-based EV giant. The data firm explained that there is a proliferation of fully electric vehicles that cost under $50K, where “Tesla does not yet truly compete”. Furthermore, S&P Global Mobility also noted:
“Tesla’s position is changing as new, more affordable options arrive, offering equal or better technology and production build. Given that consumer choice and consumer interest in EVs are growing, Tesla’s ability to retain a dominant market share will be challenged going forward.”
According to S&P Global Mobility, Tesla’s market share of new registered electric vehicles in the US for the third quarter is at 65%. This figure represents a 5% decline year-over-year (YoY) and a 14% fall from 2020.
S&P Global Mobility also projects that Tesla will face much stiffer competition in three years. According to the data firm, EV models will grow from 48 to 159 by 2025.
Although investors anticipated a drop in Tesla’s market share, the rate of this decline may be alarming. On Tuesday, Tesla stock closed down by a point to $180, and has declined by almost half on a year-to-date basis.
To potentially undercut rivals, Tesla is reportedly designing a rehashed version of its entry-level Model 3. This vehicle line will cost less to produce and reduce the complexity and components in the interior. During Tesla’s third-quarter earnings call in October, Musk touched on the upcoming cheaper model he first teased in 2020. According to the chief executive:
“We don’t want to talk exact dates, but this is the primary focus of our new vehicle development team, obviously.”
Twitter Negative Impact
Investors also fear that the negative impact of Musk’s acquisition of Twitter will affect Tesla’s shares in the future. Tesla stock already took a hit at the onset of the purchase when Musk had to offload billions of dollars in TSLA to finance the $44 billion acquisition. The sale likely triggered a sharp decline in Tesla stock, but investors worry that Musk’s new ‘questionable’ leadership at Twitter may be unsavory for TSLA. Such antics include the outspoken businessman imploring his followers to vote Republican on Election Day. Morgan Stanley analyst Adam Jonas assessed the situation saying that “Musk’s recent involvement with Twitter has contributed to negative sentiment momentum in Tesla shares”. Furthermore, observers generally believe that trying to sway votes in favor of a specific party is unbecoming of a CEO of a major company.