Tesla skeptics are raising concerns about the future of the electric carmaker following its impressive $500 billion rally this year.
Rival automakers capitalizing on the growing demand for electric vehicles pose the biggest threat to Tesla over the next two years, especially as Elon Musk’s attention appears divided across various ventures.
According to respondents in the latest Markets Live Pulse survey, 54 percent highlighted the heightened risk of industry competition, while 26 percent expressed concerns about Musk’s unpredictable behavior and decision-making.
CEO of Tuttle Capital Management, Matthew Tuttle, stated that Musk’s unpredictability is among the top risks for Tesla.
He said; “Musk is just such an unpredictable person, that I would count it among one of the top risks for Tesla.”
Although Tesla currently enjoys a significant lead over other companies, its high market valuation is based on the assumption that it will maintain dominance in a future where electric vehicles become more commonplace.
However, Tesla’s rivals are rapidly gaining ground. China’s BYD recently set a sales record for the second quarter, delivering 352,163 fully electric vehicles, while Tesla handed over 466,140 EVs to customers worldwide.
While some argue that Tesla’s competitors still face challenges, such as Ford Motor’s decline in US electric vehicle sales, analysts and investors warn that Tesla’s advantage could erode quickly.
Government policies encouraging the adoption of electric vehicles may level the playing field. With increasing competition, Tesla’s expensive shares, trading at 75 times forward earnings, leave little room for error compared to other auto companies.
The pressure to defend market share has led to price reductions, with 63 percent of respondents in the survey expecting Tesla to continue lowering prices to capture higher volumes.
This strategy, however, impacts the company’s profit margin, which has already been affected. Further price cuts could narrow the gap between Tesla and its competitors.
The impact of recent price cuts on Tesla’s profits will be revealed when the company reports its second-quarter results.
The average profit estimate for the quarter has declined by 29 percent in the past six months.
Amidst these challenges, the “Musk-risk” embedded in Tesla shares remains a concern for investors.
Musk’s high-profile ventures, such as his bid for Twitter and selling Tesla stock to fund the acquisition, have previously weighed on the company’s shares.
