May 20, 2022 - 10:19am
Even before yesterday’s embarrassing revelations about Elon Musk, Tesla was having bad year. Its stock price has fallen nearly 41% since 2021 and it is showing no sign of slowing down. For reference, Ford — America’s largest car manufacturer — has seen its stock price rise by around 6% in the same period. Clearly, the problem is not the car market. So, what is going on?
Tesla has followed a similar trajectory to another Silicon Valley start-up: Uber. The taxi company has seen a decline in its stock price of almost 55% in the last year, even though Medallion Financial, a company that provides loans to purchase taxi medallions in the US, is only down around 19%. This shows that, like Tesla, the issue is the company, not the market.
These companies have a lot in common: both are experimental business models and neither one has proven itself to the market. Uber has been around for 13 years and has never turned a consistent profit, while Tesla has been around for 14; any profit the company makes is completely reliant on carbon credits — and occasionally on Bitcoin trading.
Uber, meanwhile, has serious problems with its business model. Hubert Horan, an analyst of the taxi industry, argues that “the widespread belief that it is a highly innovative and successful company has no basis in economic reality”. While I would not go quite that far in describing Tesla, I have laid out problems with its business model on this site before.
The two companies’ stock prices are falling in line with the broader tech stock market crash. Technology is where most of the entrepreneurship — and therefore risk — has been in the market this cycle. Markets basically think of companies like Uber and Tesla as tech companies and price them accordingly.
But Tesla has even deeper problems. This week, it was announced that Tesla would be dropped from the top ten ESG rated companies in the S&P500. This is problematic for Tesla because it markets itself as a green investment and, as mentioned, relies on carbon credits for its survival. The outrage over Tesla having its ESG rating downgraded has itself provoked a lot of backlash and, in the medium-term, may have investors questioning exactly what these criteria are based on. Ultimately though, given the general market turmoil and Tesla’s until-now impeccable green credentials, in the immediate-term the pain will be felt by the company.
This raises another issue for Tesla: its founder’s decision to enter the political arena. Since Elon Musk announced that he was going to buy and reform Twitter — another company with dubious business prospects — he has been making increasingly political statements on his own Twitter account.
If Musk becomes more vocal about his support for the Republican Party, this could alienate a Democrat-dominated Wall Street — lobbying from the financial sector has vastly favoured Democrats over Republicans in recent years. That said, Musk has tended to be ahead of the pack in many regards — a trend-setter, not a trend-follower — and it is an open secret that many in the professional classes are disappointed with the Biden administration, both in terms of the direction it has taken and in terms of actual outcomes.
Given the car company’s already shaky business model, it is hard to see how the Twitter deal will help Musk’s or Tesla’s interests. One thing’s for sure: Tesla’s golden moment is over. Whether Elon Musk’s is remains to be seen.
Philip Pilkington is a macroeconomist and investment professional, and the author of The Reformation in Economics
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SubscribeMr Putin is very fortunate indeed that he does NOT have to deal with the wretched RMT, ASLEF, & TSSA*
(UK Railway Unions for American readers.).
Conversely, they should be grateful they don’t have to deal with him.
But of course, their leaders wouldn’t have objected to having to deal with previous Kremlin regimes.
You can’t make this up.
The gauleiter of Kherson just died in a car accident–and a Russian reporter then proudly displayed the nom de guerre written on his pass:
“Stalin”
Putin has poisoned everything and everybody in Russia.
What’s striking is that Russia’s actions exactly mirror that of the Arabs WRT Israel in the latter part of the 20th C. An independent Israel was anathema to leaders like Nasser, who also hoped to unite the Arab World.
They kept attacking–and kept losing.
Eventually they decided that neither Arab unity nor the destruction of Israel actually made much sense. So, they made accommodations, and learned to live with an independent Israel.
But then Arabs are intelligent people.
(How about Kherson, BTW?)
This will be a long war, regardless of whether the West continues to fully support Ukraine.
Russia’ objective is simple–and unachievable: to change the identity of 40 million people. This can only be done with an incredible amount of resources, accompanied by an incredible amount of brute force.
But Russia simply lacks the resources to militarily occupy even part of the country. Significantly, even high-ranking Russian officials can’t be protected in Russian-occupied Ukraine.
Moreover, no sane Ukrainian would dare live under the Russian regime that now prevails in places like Kherson and Mariupol. Even if they favor Putin and Russia, there is no way most can prove their loyalty. As with Stalin’s policies after WW2, they will always be categorized as traitors for having lived under the “Nazi” regime. Until physically conquered, they will continue to support Zelensky.
The great unknown is whether Putin (or, more likely, his successors) can replicate a fully Stalinist regime. If it can, then the war will last longer. A ceasefire will only be a means to rebuild the army.
Putin and his circle see this as an existential issue for themselves. To them, even the destruction of Russia is a small price to pay for their own survival.
I am surprised that the Ukrainians haven’t made a move on Belarus where it appears most of the population would be glad to get rid of Lukashenko.
Obviously Putin and the West would view that as an escalation – but since it’s likely western support for Ukraine will decline in the next few months, especially after the Republican gains in the midterms, they really have nothing to lose by involving Belarus now: Escalate the war to the point where the West can’t reduce their support by taking it outside Ukraine.
Careful what you wish for.
This new phase of war by another means has never been possible before – the taking out of international pipelines, cables, freight, power lines, energy supply – Hacking vital computer controlled systems…. But it is now. It is where things could go if escalation instead of treaty and peace.
This war is going to cause Famine in the developing world – fuel and fertilizer poverty…And it may destroy the European economy – pensions may be toast already…
Thats right – it is so hard to stop because Biden forbids it – forbids peace – the reasons are not known – Military-Industrial? WEF Capture? Ukraine and/or Russia holds the dirt on the Biden and Clinton Families? (who always used Ukraine as their piggy bank). But Biden decided this would be his legacy, a gentler WWIII –
The thing is today the Americans vote, and Biden will not be the autocrat anymore – saner heads will have a say, and the treaty table will be used.
Obviously, you are unfamiliar with British history.
The problem with such attacks, as the Blitz and the V-weapon campaigns demonstrated, is that they anger people more than they frighten them. It simply makes the war more existential, and subsequent retaliation more severe.
But perhaps you can think of instances where Russians capitulated to such attacks?
“the reasons are not known”
Because you’re making it up you little Quisling.
Looks like Biden won’t have much to worry about after all.
And since most of the GOP wants to supply Ukraine, it’s an even bigger win for Zelensky.
Funny how a lot of prophecies don’t pan out.
Slavic phraseology.Russia should again recruit from Cambridge.
Given that several NATO countries have been implicated in attacks in Ukraine and specifically the UK has been accused of planning and aiding the bombing of the Kerch bridge (in Crimea, which is de facto Russia), should we take at face value that these attacks are by Russian protesters and not by foreign nationals? After all it has been explicitly stated by Biden that “regime change” is the objective in Russia. Also, Putin is known to be popular amongst the Russian public.
Russian disinfo. Ignore.
That’s why Russian support for the war has dropped from 26% to 16%.
I am so glad to not be a Putin supporter. It’s so good that Boris was able to come from England and talk Zelinski out of peace talks with Russia back in the Spring. The sanctions have been so successful. Look at how much the Russian people are suffering, their currency is crashing, look at all this internal strife and sabatoge they are having, and we’re not even sure if they have enough energy to make it through the winter.
And look at all the gains Ukraine has been able to accomplish, sadly at the cost of all those lives. Now they are in so much better of a position to negotiate an even better outcome! We were all told, and we all knew that Russia was so weak and that Ukraine would be able to beat them back like this, and boy has it happened. All the billions poured into Ukraine, more and more weapons. It’s all been a game changer…
I am so glad that I listened to all the smart people, all the right people told us the way things were, and they were right. We’re right to get behind them! They never tell us lies. They never stretch the truth. They can be trusted! They’re the good guys after all, and have our good in mind, Ukraine’s good in mind, and they are trying to save us from dangerous things like nuclear war, and WWIII and things like that. So smart, so good, so honest, so trustworthy. It’s a good thing I agreed and am good and smart and thoughtful and got behind the right things they said were true. I’m sure Russia is going to collapse or they’er going to get rid of Putin any day now. Keep fighting the good fight people!
The pathetic rancid sarcasm of a Russia apologist or bot.
It was excellent sarcasm – the problem is to you all his statements are really true – you and the down voters – you believe everything he is parodying – That is why you Down Vote – because he points out the ridiculous position the MSM Agenda has planted in your brain.
Do you all Neo-Con, Neo-Liberal warmongers flush with pride in your war as you pay the gas bill? The light bill, fill the car tank? Knowing it is for the Greater Good – for Democracy?
Are you Aaron’s sister???
Yep, I feel very pleased with myself.
We obliterated Russia in 1990, and now we’re doing it again. Go to Central Asia, the Baltics and the southern Caucasus to see how popular it was–and is.
It isn’t that we like democracy more.
It’s that we like Russia less.
Sounds like the panic of a loser.