The richest man in the world is less rich today after Telsa stock fell almost 9% in the third quarter. A 9% drop in Tesla stock amounts to $24 billion of Musk's net worth gone.
Musk owns 21% of Tesla, which makes up well over half of his wealth. The electric auto-maker posted a nearly $20 billion loss in Q3. This is after Tesla lost even more, $21.3 billion, in Q2.
However, the reason behind Tesla's drop isn't necessarily a drop in vehicle standards or demand. Instead, Musk's price drop for Tesla cars, in an effort to spur demand and bring Tesla into the reach of more people, is the primary cause of Tesla's underperformance.
For instance, Musk cut the price of its Model Y Long Range by $2,000, bringing the sticker price to $48,990. The price of Tesla cars has fallen about 20% since 2022, and that doesn't include the $7,500 federal tax credit for Teslas.
“I’ve talked to lots of people who still think Teslas are, like, super-expensive,” Musk said. “I’m like, no, the [average selling price] of a Tesla is lower than the average selling price in the U.S.”
Consumers have welcomed the price cuts, but they have also raised concerns among investors about Tesla's profitability. Tesla has already been dealing with rising costs for raw materials and transportation, and the price cuts could further squeeze the company's margins.
Musk has said that he is willing to sacrifice some profitability in order to boost sales and make Tesla cars more affordable for consumers. He has also said that he believes that Tesla's long-term success depends on making electric vehicles the mainstream choice for transportation.
Experts say that Tesla may need to consider spending more on ads.
With other car manufacturers spending billions on advertisements, cutting the sticker price alone may not be enough.
Tesla Changed the EV Game
Tesla is an American electric vehicle (EV) and clean energy company founded by Elon Musk, JB Straubel, and a group of engineers in 2003.
It has since become one of the world's most recognizable and influential automotive manufacturers. What sets Tesla apart from traditional car manufacturers is its relentless pursuit of innovation in the electric vehicle industry and its commitment to sustainable energy solutions.
One of the key differentiators of Tesla is its dedication to producing electric vehicles that are not just environmentally friendly but also compelling in terms of performance.
Tesla's cars are known for their exceptional acceleration, impressive range, and cutting-edge technology, including a self-driving upgrade capability.
The Model S, Model 3, Model X, and Model Y have become synonymous with electric vehicle excellence, setting the standard for EVs in terms of range, safety features, and autonomous driving capabilities.
Furthermore, Tesla has significantly disrupted the automotive industry by adopting a direct-to-consumer sales model, bypassing traditional dealerships in favor of its own showrooms and online ordering system.
This approach empowers the company to maintain tighter control over its brand, pricing, and customer experience.
When an update needs to be made, Tesla customers don't need to make an appointment to bring their car to a dealer. Instead, Tesla also regularly releases over-the-air software updates, which means that its vehicles can improve and add new features even after purchase, a feature not typically found in the auto industry.
Beyond automobiles, Tesla has diversified into other sustainable energy solutions.
The company is known for its energy products like solar panels and the Powerwall, which stores solar energy for homes and businesses. Tesla's Gigafactories also transform how batteries and energy storage systems are produced at scale.
Tesla's vision extends far beyond electric cars; it aims to change how we generate and consume energy, all while pushing the boundaries of what's possible in transportation. This unique blend of innovation, sustainability, and customer-focused business practices makes Tesla stand out in the automotive and clean energy sectors.