A year ago, Tesla Inc. seemed unbeatable, with its shares near a record high amid soaring optimism for the global electric-vehicle market. Now investors are struggling to see a bottom.

The stock was never for the faint of heart, given its volatility and the mercurial style of its chief executive, Elon Musk. Still, the magnitude of this year’s rout is staggering: It’s lost more than 60% through Tuesday’s close, on pace for a record annual decline, and erasing about $626 billion of shareholder value.

The stock fell 8.1% Tuesday to $137.80, its weakest since November 2020, after Evercore ISI and Mizuho Securities became the latest to slash projections. On Wednesday, it briefly dipped below $136.03, the level where the shares were trading in November 2020 when S&P Dow Jones Indices announced that the stock would be included in the S&P 500 Index.

Given the stock’s dive, the average analyst target of about $259 — which is a far cry from the record close of $409.97 touched in November last year — implies a roughly 90% gain over the next 12 months from Tuesday’s close, suggesting there may be room for that gap to narrow. 

Tesla Demand

A big Shanghai production increase, a weak Chinese and global economy are all raising concerns about demand, even with deliveries set to hit record highs in Q4.

Tesla cut prices in China in late October, and has announced a slew of incentives to clear out inventory. But wait times are essentially at zero.

There are consistent reports of Shanghai production cuts, though Tesla has denied them.

Tesla may be betting on a big quarter for European sales, but that could draw down backlogs heading into 2023. On Jan. 1, EV subsidies end in China and Norway, with Germany cutting subsidies substantially. Sweden has just ended its EV subsidies while the U.K. is ending its program.

Tesla is offering free Supercharger kilometers in a year-end European push, along with some temporary U.K. price cuts.

That comes as China’s EV competition intensifies, with more and more models from the likes of BYD (BYDDF), Nio (NIO), Li Auto (LI) and more taking on Tesla’s aging Model 3 and Model Y. Europe’s EV market also is getting more crowded.

On the flip side, Tesla will be eligible for new U.S. tax credits of up to $7,500 per vehicle. Tesla still faces far less competition in its home market than in Europe and China. With potential buyers holding off on purchases or deliveries, Tesla is offering $3,750 off Model 3 and Model Y deliveries before year-end, along with 10,000 free Supercharger miles.

Beyond Tesla, there are concerns about EV demand around the world amid a weak global economy and high EV prices. That could slow the adoption of electric vehicles generally in the coming years.

Meanwhile, the Tesla CEO has tweeted at length about the impact tighter monetary policy from the Federal Reserve is having on all financial assets, Tesla included.

Looking at the success of short-sellers this year, there’s little doubt the challenges for markets go beyond the CEO of Tesla having a second job as the CEO at Twitter: Data from S3 Partners also shows shorts are up more than $300 billion in realized and unrealized gains this year.

In a widely-covered exchange on Twitter earlier this week, Musk chided longtime Tesla bull Ross Gerber to read Security Analysis 101 to understand what is happening to Tesla stock.

Musk added in a follow-up tweet: “As bank savings account interest rates, which are guaranteed, start to approach stock market returns, which are *not* guaranteed, people will increasingly move their money out of stocks into cash, thus causing stocks to drop.”

As Warren Buffett told Yahoo Finance editor-in-chief Andy Serwer years ago: “Everything in valuation gets back to interest rates.”

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Pure./Trade is a website operated by Redpine Capital Limited, a Cypriot Investment Firm, which is authorised and regulated by the Cyprus Securities and Exchange Commission, licence number 391/20. Its registered office at Spyrou Kyprianou 65, Crystalserve Business Center, Ground Floor 4003, Limassol, Cyprus.

Risk Warning Trade: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The vast majority of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Restricted regions: The Company does not provide investment and ancillary services in the territories of third countries.