Tesla cannot sell its current vehicle lineup profitably on a sustainable basis. As tax credits expire and new competitors enter the electric vehicle market, Tesla will face increasing pressure to cut prices again, further diminishing its margins.Meanwhile, it is rapidly burning through cash just to keep the lights on.
Tesla’s $45 billion valuation is based on the belief that it can rapidly and profitably scale production of its current and planned products. In other words, Tesla is valued for its growth story. That story came to an end on April 24. The market has not yet fully come to terms with this fact, but it will soon enough. Mounting losses and disappointing sales will inevitably trigger a severe downward price correction.
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