Can Tesla Fly High Again?
Is Tesla a tech company or a car company?
Answering that question will determine the company’s future. According to The Economist, Tesla lost 71% of its market value, which once surpassed $1.2 trillion, by the end of 2022. CEO Elon Musk alone lost $200 billion.
Of course, Tesla was not alone. Technology stocks, startups and the broader market plunged. According to a Bloomberg News analysis, mega-hedge firms that reveled in soaring valuations on startups in 2021 suffered record losses last year. In fact, 70% of 46 private companies tracked by Bloomberg had been marked down by mutual funds by September 2022. The average decline was 35%, but some lost 85% of their value.
Even if a recession hits, the broader market will come back in time. For the PE, VC and family office types, whatever the market conditions, you need high-quality deal flow vetted by insiders who know the sectors they engage in, be it healthcare, supply chain, facility development, manufacturing, etc. Hype is not investable.
For Tesla, it still ended 2022 worth more than its automaker rivals – $386 billion, according to CNN Business. Still, The Economist noted that many investors now value Tesla as a car company, not a tech company. And Tesla produces many fewer vehicles than its rivals.
However, Tesla has long considered itself a tech company, not a car company. Tesla’s website claims the company is “building a world powered by solar energy, running on batteries and transported by electric vehicles.”
As I noted in my latest book Insightful Leadership: Surfing the Waves to Organizational Excellence, its innovations grow beyond the four tires of a vehicle, including “Powerwalls, its integrated battery systems, to reduce reliance on the electricity grid; solar roof tiles; solar panels; and giga-scale megapacks to power energy projects. By 2021, Tesla had more than three hundred patents on its various innovations.”
In other words, Tesla’s gleaming electric vehicles zipping around the highways and charging up at the local gas stations and shopping centers are great for the company’s image in the general public. But its solar roofs, solar panels and battery technology – technical innovations – will decide its future valuation for investors.
Elon Musk has spent a lifetime proving critics wrong. For years, Tesla’s demise has been predicted by detractors – but it’s still here, still producing and selling cars, still innovating.
And Musk always thinks big – recently retweeting information about how covering 1.2% of the Sahara Desert with solar panels could power a civilization 100 times the size of Earth’s.
I would not count Musk out. After all, Tesla’s stock price has nearly doubled in the last few weeks.