Tesla's production of motor vehicles was up by about 40 per cent in 2022, and yet the share price dropped by about two thirds in the same calendar year. And given that its market capitalisation still dwarfs the rest of the motoring industry, some say it may still have quite a bit further to fall.
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Nobody knows what the future holds, but as for the recent past, this decline certainly begs the question, why?
First off, the share price of a company doesn't really affect the day-to-day operations. It mainly affects investors. It does (or it should) affect the company's strategy though, because those investors do, at some point, expect a return on their investment from the company's performance.
Possibly the simplest explanation for the fall is the traded price of Tesla stock climbed way too high in 2021 for no valid reason, along with many other stocks especially in the tech sector. And Tesla do want you to think of them as a tech company - specifically an AI company - rather than as a product manufacturer (which it can be argued is what they really are).
Meanwhile various big-name tech stocks also came back down to earth, and for about the same reason. Plus Tesla's US contemporaries in the automotive sector also went up in 2021 and came back down in 2022. Not nearly as far up and down in dollar terms, but Ford for example saw its share price fall 50 per cent in 2022.
As for Tesla's performance as an automotive manufacturer, a 40 per cent rise in deliveries (for a total of 1.31 million vehicles worldwide in 2022) means it had its biggest year ever, but its projection was for a 50 per cent rise (1.4 million vehicles).
This shortfall wasn't for a lack of orders either. Wait times are up (across the automotive sector, but especially for electric and hybrid vehicles), which starts to reveal some of its real problems.
The issue hasn't been a lack of investment in factories. They built new ones in Berlin and Texas to add to the plants in Fremont California (which now produces more vehicles than it did with the previous owner), Nevada, New York, and Shanghai China (where Australia's Teslas are also built).
Tesla's manufacturing doesn't just cover the automotive sector either. Over the years it has diversified into battery storage and solar shingles (although that's possibly part of the problem; those shingles were nowhere near what CEO Elon Musk claimed they would be in terms of cost or efficiency).
What it has been struggling with is supply, and China's zero-COVID policy until the end of 2022.
Tesla has long had a high profit margin per vehicle, but even with the production numbers reaching a personal best they are still only tiny compared to the rest of the automotive market.
Costs have been going up as well, so the profit margins are being squeezed from that end, and Tesla have also had to reduce the prices in some markets.
Tesla also held $US1.99 billion of Bitcoin at the end of 2021, but by mid 2022 it had dumped three quarters of it to improve the company's cash position at the time.
One of the bigger issues affecting the stock price more than a (big) market correction was Musk backed himself into a corner with what might have started as a prank. He was forced to go through with buying Twitter, diverting his attention away from his other companies, especially Tesla, but also necessitating him selling about a $US40 billion slice of his Tesla stock (and any one stockholder selling a lot of a single stock will likely see the price drop, for at least a little while).
One more piece of the puzzle is Musk himself. In 2018 when he admitted the job was quite stressful Tesla's stock price dropped almost 9 per cent immediately, and he didn't exactly cover himself in glory in 2022.
From telling Tesla's white collar staff they could pretend to work for someone else if they wanted to work from home (following on from Tesla's other controversial actions in response to COVID), to revealing his political leanings being basically the opposite of a typical Tesla customer, and the chaos under his ownership at Twitter, it has not been a great period for investor confidence.
