Tesla Stock Faces Downward Spiral Amid Market Pressures
Tesla stock took a significant hit, plummeting 2.3% on Thursday, thereby extending its year-to-date decline to 29.3%, marking it as one of the least favorable performers in the market as of 2024. Citi equity analysts pinpoint the drop primarily to two critical issues impacting the electric vehicle (EV) giant's standing.
Firstly, the debut of Xiaomi's SU7 electric vehicle alongside its attractive pricing strategy has heightened the anxiety over the escalating rivalry within the China New Energy Vehicle (NEV) market. This burgeoning competition poses a direct threat to Tesla's dominance in the region. Xiaomi introduced its inaugural EV, the SU7, on March 28, surprising the market with an additional SU7 Pro edition that broadened its electric vehicle offerings. With the base model beginning at Rmb215.9k, the SU7 Pro at Rmb245.9k, and the SU7 Max at Rmb299.9k, Xiaomi's strategy is deemed competitive. Citi analysts forecast that Xiaomi could ship 60k units in 2024, with expectations to rise to 131k and 252k in the following years.
Secondly, persistent concerns over Tesla's first-quarter deliveries are casting a shadow on the brand's outlook, further contributing to the day's negative momentum. A series of reduced delivery forecasts by Wall Street analysts accentuates the adverse sentiment, pushing the consensus even lower. Notably, Deutsche Bank has revised down the price target on Tesla stock, following the company's announcement of substantial price cuts in China and Europe. The analysts interpret these price adjustments as an effort to bolster March sales, rather than an indicator of robust demand.
Despite the current setback in Tesla shares, Citi analysts suggest that the scenario might hint at the undervalued potential within the traditional automotive sector. They emphasize the unacknowledged worth of GM’s and Ford’s North American Truck/Commercial franchises, highlighting their strong growth and defensive characteristics.
As the electric vehicle landscape continues to evolve, with new players entering the fray and competition intensifying, Tesla's strategies and market maneuvers remain under the microscope. Investors and market analysts alike will be keenly watching how the company adapts to these challenges and whether it can maintain its market-leading position amid the shifting dynamics of the electric vehicle industry.
Analyst comment
Negative news: Tesla stock has continued to decline, with a 2.3% drop on Thursday and a year-to-date decline of 29.3%. This is due to increased competition in the Chinese electric vehicle market from Xiaomi’s SU7 series and concerns over Tesla’s first-quarter deliveries.
As an analyst, I expect the market for Tesla stock to continue facing downward pressure as competition in the electric vehicle market intensifies and concerns over deliveries persist. Investors will closely monitor Tesla’s strategies and market maneuvers to see if it can maintain its market-leading position.
