Tesla (NASDAQ:TSLA) stock has dropped 14% month-over-month as of early morning trading on Monday, March 25. The Texas-based company is engaged in the design, development manufacture, lease, and sale of electric vehicles, as well as energy generation and storage systems in the United States, China, and around the world. Its shares have plunged 30% so far in 2024. What is behind this recent turbulence?
Back in January, the company had warned investors that its vehicle-delivery growth rates were set to be “notably lower” than its 2023 levels. Meanwhile, CEO Elon Musk conceded that profit margins would improve only on the back of central-bank interest-rate cuts. Tesla’s profit margins had narrowed coming into 2024.
Tesla has also been hit by weaker-than-expected sales figures from China. Volumes fell sharply in February, applying pressure on the company’s delivery targets. China has been a sticking point for Tesla as the country has introduced intense competition in the EV market. “Chinese car companies are the most competitive car companies in the world,” Musk said in January. “I think they will have significant success outside of China depending on what kind of tariffs or trade barriers are established. Frankly, I think if there are not trade barriers established, they will pretty much demolish most other companies in the world.”
Despite the headwinds, Tesla still boasts a virtually immaculate balance sheet. Moreover, it is still on track for solid earnings growth going forward. Tesla and its peers will require an assist from the Fed in the quarters ahead. If that does not arrive soon, leadership may need to prepare for a leaner year.
