Hey everybody, welcome back to the Elon Musk Podcast. This is a show where we discuss the critical Crossroads, The Shape, SpaceX, Tesla X, The Boring Company, and Neuralink, and I'm your host, Will Walden. If you want uninterrupted episodes of the Elon Musk podcast, please go to clubelon.supercast.com to find out how there's a link in the
show notes. Tesla Inc has witnessed a sharp decline in market value, losing over $94 billion in the early weeks of 2024. Now this downturn marks a stark contrast to the company's success in 2023, where its stock value more than doubled. Now the slump is attributed to a series of adverse developments, including reduced demand for E VS in the United States, price cuts in China, and increasing
labor costs. Now the electric vehicle industry is currently experiencing A slowdown altogether, particularly in the US market. Investors main concern on Tesla is stagnating growth, said Jeffrey Osborne, an analyst from Cohen, highlighting concerns about Tesla's performance, especially in light of the price reductions in the competitive Chinese market. Now, these factors have fueled investor apprehension, contributing to the company's recent financial setbacks.
Tesla's recent market capitalization loss is unprecedented since its public debut in 2010. The company's stock has plunged by 12% since January 2024, the most significant drop since a 14% decline over the first nine trading days of 2016. The outlook for a rapid recovery seems bleak given the current market conditions, and the company has been aggressively cutting prices since early of 2023 to stimulate demand. But this strategy has led to a substantial erosion of profit margins.
The third quarter of the previous year saw Tesla's automotive gross margin excluded regulatory credits fall to 16.3% from 27.9% a year earlier. And additionally, Tesla is facing increased financial pressure due to pay raises for production workers at its US plants.
We are going through a cyclical downturn for E VS, but competitive dynamics are exacerbating the cyclical pressures, said Ivana de Leskva, senior chief investment officer at Spear Invest. She noted that the combination of price cuts and shrinking margins are consequences of these challenging market conditions. Now adding to Tesla's challenges.
The company has had to redirect shipments intended for its Berlin plant and suspend most production there from January 29th to February 11th due to security concerns and Western military actions in the Red Sea. This disruption further complicates the company's operational landscape. Tesla first raised alarms about slow EV demand during its third quarter earnings report in October.
Following this, several automakers and suppliers worldwide expressed similar concerns, leading to a scaling back of expansion plans across the industry in recent development. Tesla's fourth quarter delivery numbers, though better than expected, positioned the company behind China's BYD company in global electric car sales. This shift has been a wake up call for investors, particularly after Tesla's stock was among the top performance in the S&P
500 last year. Tesla CEO Elon Musk, the world's richest person as of last year, has seen a significant decrease in his net worth by $23 billion in the early part of 2024. His wealth, primarily derived from his stakes and Tesla and SpaceX, has been affected by the recent downturn in Tesla's market value. And despite these setbacks, Tesla remains A crucial player in the global shift towards
electric vehicles. While China's BYD has surpassed Tesla unit sales, Tesla still leads in revenue and profits, particularly in the US market. However, Tesla's past success and inflated market capitalization have made its stock particularly sensitive to negative news. A major point of contention of Tesla is its unfulfilled promise to fully autonomous driving and AI advancements.
Being simply another automotive manufacturer is not going to cut it for a $750 billion valuation, said to Levska, emphasizing that Tesla's high valuation hinges on these future technologies and the company's failure to deliver on them. Thus far, in response to industry trends, Tesla has announced pay increases for workers at its US factories.
This move follows similar actions by non union automakers like Toyota, Volkswagen and Hyundai coming in the wake of historic labor contracts securing the United Auto Workers or UAW for employees at Ford, General Motors and Solantis. Now the pay raises at Tesla, which were not detailed in terms of amounts, apply to all US production associates, material
handlers and quality inspectors. This decision aligns with broader industry trends where automakers are increasing wages to remain competitive and respond to unitization efforts. So Tesla's not doing anything really out of the ordinary here. UAW President Sean Fain has identified Tesla as a key target in the union's expansion efforts following successful wage negotiations with the Big Three automakers.
And Fain attributed past unization failures to internal corruption and unfavorable contracts, but remains optimistic about UA WS future prospects. Elon Musk, Tesla CEO, has historically been critical of unions. He's emphasized cost cutting measures in response to economic pressures and the need to make Tesla's electric vehicles more affordable. The increased wages for production workers, however, may complicate these cost reduction efforts.
Tesla's Fremont factory, which employs over 20,000 workers, has seen the formation of a UAW organizing committee. The National Labor Relations Board previously ruled that Tesla violated labor laws during past unionization efforts. Tesla denies these allegation and is appealing the ruling in federal court. The pay increases at Tesla's US plans reflect A broader industry trend, though. Following the UAW successful strikes against the Big Three
automakers. Other major car companies including Hyundai, Honda, and Toyota have also raised wages at their US factories in response to the unions. Now, the wage hikes at Tesla and other automakers show a significant shift in the automotive industry's labor dynamics. While these increases are a step toward addressing worker demands, they also reflect the changing economic landscape and the growing influence of Labor
unions like the UAW. Now, Tesla's substantial market value loss marks a challenging start to 2024, contrasting sharply with its previous year's huge success. And the company faces multiple hurdles, including slowing EV demand, competitive market dynamics and increased labor costs. And despite these challenges, Tesla is the juggernaut in the EV industry. And now it's under new pressures.
And the recent wage increases across the industry, including at Tesla, could mean a significant shift in Tesla's business. Hey, thank you so much for listening today. I really do appreciate your support. If you could take a second and hit the subscribe or the follow button on whatever podcast platform that you're listening on right now, I'd greatly appreciate it. It helps out the show tremendously and you'll never miss an episode. And each episode is about 10 minutes or less to get you
caught up quickly. And please, if you want to support the show even more, go to patreon.com/stage Zero and please take care of yourselves and each other and I'll see you tomorrow.