Tesla is One Stock to Stay Away From 2023

Electric Vehicles (EVs), like the ones made by Tesla, will undoubtedly become the norm during the next few decades, putting an end to more than 100 years of internal combustion engine automobile domination. According to Statista, sales will increase at a compound annual rate of roughly 17% from $389 billion in 2022 to $847 billion in 2027. Long-term investors will find this to be fertile ground, but not every stock is a terrific option in 2023. Tesla (TSLA) appears to be one of these.

Tesla has been one of the most profitable investments in the previous ten years, returning an astounding 5,700%. The stock, meanwhile, is down more than 67% this year. Unfortunately, due to various headwinds, the decrease may continue. Let’s take a look at a few.

The Twitter crisis

Tesla investors have been distracted by Elon Musk’s purchase of Twitter. Tesla shares have dropped 60% after the CEO’s offer was disclosed on April 14, 2022. Those expecting renewed attention on Tesla after the acquisition was completely been let down. Several high-profile Twitter squabbles have ensued. Investors may view Musk’s focus on Twitter as detrimental to Tesla shares at a time when Tesla requires its CEO’s attention more than ever.

Musk has indicated that he will stand down as CEO of Twitter once a replacement is selected. This is fantastic news for Tesla and may result in a short-term increase in stock price if a new CEO is found. However, Twitter’s complexity isn’t Tesla stock’s only issue.

Competition is catching up.

For years, Tesla has had the first-mover advantage in the EV business. By 2021, the business will have sold 14% of all EV vehicles worldwide and more than 70% of the coveted US market.

Advertisement

Tesla’s market share in the United States has nowhere to go but down, following the trajectory of roughly 80% in 2020, 70% in 2021, and 65% in Q3 2022. Other automakers are making significant investments to electrify their fleets. Ford Motor Company, for example, plans to spend $22 billion through 2025, while General Motors plans to spend $35 billion. GM expects to sell a million EVs by then and hopes to have an all-electric fleet.

This is not to say that Tesla cannot compete; far from it. The competition will be stiff, and the path ahead will become substantially more arduous.

A triple economic blow

Three significant economic challenges will make 2023 difficult:

• A possible recession
• Interest rates are rising
• Falling Consumer Confidence

Electric Vehicles, particularly high-performance Teslas, are not inexpensive. In fact, at an average price of $67,000, they are just behind premium cars.

Yes, consumers have cheaper ownership expenses because they don’t have to purchase gas, but with a recession expected in 2023, future savings may not be front of mind. When a recession hits, buyers postpone substantial purchases, which might affect Tesla’s profits dramatically. Tesla has just introduced a rare $7,500 discount on some automobiles as if to make the point about lagging demand.

To make matters worse, the Federal Reserve has stated that it would continue to raise interest rates until inflation decreases drastically. This makes financed autos even more expensive for consumers.

Finally, consumer confidence is hovering around the Great Recession lows.

Consumer sentiment is widely regarded as a leading indicator of future consumer spending, which is extremely troublesome for high-priced electric automobiles in 2023.

Advertisement

Despite the stock’s decline, Tesla still has the most incredible market value of any automotive firm in the world. With a slew of challenges looming for the firm, the economy, and the industry in 2023, Tesla may be one stock to avoid.

For More Financial News, Click Here.