The Tesla Tumble: Why Now Is the Time to Dump TSLA Stock

Stocks to sell

Tesla (NASDAQ:TSLA) stock has tumbled more than 5% in recent days as two executives depart the EV maker. Plus, the company announced workforce cuts of over 10%. According to a CNBC memo, CEO Elon Musk said the cost reductions are necessary as the company is more focused on enhancing productivity for more stabilized growth.

Executives Drew Baglino and Rohan Patel departed Tesla, with Patel expressing gratitude, highlighting the company’s accomplishments and wishing Tesla well.These headwinds are just some of the reasons why now may be the best time for investors to part ways with TSLA stock too.

Musk Announces Massive Layoffs

In a memo, Elon Musk, the billionaire owner, conveyed the necessity of staff cuts, though it pained him. Tesla, with 140,473 employees as of December, streamlined operations. Tesla still needs to respond to BBC’s inquiry.

Elon Musk regretted staff cuts, aiming for a lean, innovative Tesla. Laid off employees, including an executive, faced email lockouts.

Baglino, Tesla’s powertrain VP since 2019, has exited, joined by Rohan Patel, and is leaving public policy. Patel thanked Musk for empowerment, praising Tesla’s ethos. Their departures signal growth challenges, per Michael Ashley Schulman. Analysts cite cost pressures amid AI and model investments.

Tesla lagged in updating older EV models amid reduced consumer interest because of high interest rates. China’s affordable EVs also intensified competition.

Quarterly earnings declined, with vehicle deliveries falling for the first time in four years. Analysts dubbed the results “tumultuous.” A Production cut at Gigafactory Shanghai and shortened shifts at Austin signal Tesla’s response to slowing EV demand.

Tesla Asks Shareholders to Approve Elon’s Pay Deal

In a Wednesday Securities and Exchange Commission filing, Tesla’s board defended Musk’s pay package, which was previously approved by shareholders and voided by court in January. One proposal also states to move Tesla’s incorporation to Texas. As of this writing, the company still faces hurdles, as shares are down 37% this year.

Tesla argues for shareholder rights, as the court voided the pay package despite shareholder approval. Critics hoped for governance changes amid Musk’s controversies.

This follows news of a 10% global workforce reduction due to resource management needs. SpaceX also shifts to Texas. Analysts anticipate more developments in Tesla’s shareholder meeting amid concerns about shelved plans for a mass-market EV, dubbed “Model 2.”

Tesla Throws Away Low-Cost Car Plans

Tesla cancels its promised affordable car, opting for self-driving taxis. Contrary to initial plans, Musk’s vision shifts from mass-market EVs. 

Musk repeatedly assured investors and consumers of an affordable vehicle. Plans included Texas factory production by 2025, yet Tesla’s cheapest Model 3 starts at $39,000. Despite the Reuters report, Musk dismissed it as inaccurate. Tesla shares dropped 6%, rebounding after Musk hinted at a Robotaxi unveil.

The affordable Tesla was pivotal for Musk’s ambitious sales goals, aiming for 20 million vehicles by 2030. With the Model 2 scrapped, achieving this target is still being determined.

Wall Street forecasts, rooted in a $25,000 vehicle, project sales rising to 4.2 million by 2028. Musk previously halted the project, favoring robotaxis.

Internally named NV91 and externally referred to as H422, Tesla’s affordable car project discussions with suppliers included these code names. Messages from a Tesla program manager on March 1 instructed suppliers to cease activities related to H422/NV91. The decision to terminate the project wasn’t fully disclosed.

The manager thanked engineering staff for their efforts and urged proper documentation. 

Meetings for the affordable car project were canceled, and some engineers were reassigned. Tesla’s timeline and business model for robotaxis remain unclear, although Musk has emphasized their importance for the company’s value.

Sell TSLA Stock Now

Tesla faces challenges across all fronts amid unfavorable EV industry demand growth trends despite producing 433,000 vehicles and delivering 387,000, an 8.5% drop from the previous year and over 20% sequentially.

Demand hurdles may be worsening, particularly in Tesla’s Chinese sales, as Barron’s noted. To boost sales, Tesla slashed its full self-driving package price by 50%, potentially affecting margins.

Recent Tesla developments suggest challenges beyond demand, notably halting Cybertruck deliveries because of safety concerns. My view is that this stock simply isn’t worth owning at current levels.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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