My investing muse - what could have caused the 11% drop in Tesla price (28Jan2022)

 

What caused ‌$Tesla Motors(TSLA)$  ‌stock to fall by over 11% after a record-breaking quarterly earnings report?  Before we dive into details, let us not forget Elon the visionary.  From SpaceX, Starlink, the Boring Company and a future of autonomous, sustainable transport, he has seen the future that most of us cannot imagine.  With this backdrop, let us look into the various reasons for the fall of the stock price:

1.  The delay of the $25,000 Tesla

This was deemed by the news to be the main reason for the fall.  As per CNBC, Elon later explained that Tesla’s driverless tech should eventually be so advanced that it will drive sales of the company’s electric cars to the anticipated high volume of sales with or without adding new models at lower price points.  This did not sit well with the market.

Extract from findmyelectric.com about the prices of Tesla in USA for 2022 dated 1st Jan 2022:

The Tesla lineup for 2022 (Model S, Model 3, Model X, Model Y) ranges in cost from $44,990 – $129,990 before taxes, incentives, and specific options.

* Latest update - FSD has recently increased to $12,000 from $10,000.

As per the prices stated above, the $25,000 Tesla was viewed by the market as a key piece as Tesla expand its vehicle offering into different segments.  This was viewed as the unit that would garner the most mass interest and sales due to its affordability.  This was the "cash cow" that will help bring Tesla to the masses.  This delay has no doubt brought about "concerns" to investors, leading to the sell-off.  In fact, some observers have mentioned that Tesla's stock price started to drop after this announcement was made by Elon.

2. Full Self Driving (FSD)

Elon is expecting FSD to be ready by 2022.  This will mean that Tesla will be able to move up from SAE level 2 to SAE level 4 standard that denotes "a car that could handle every aspect of driving in some conditions without any human intervention."  Elon advised that this could reduce the costs of transportation by 4-5x.  This implies that vehicle ownership will become less attractive - as FSD propelled Robotaxis will be able to provide cheaper and safer commute.   

Vehicular autonomy led by FSD and the robotaxi market can make commute affordable, thus reducing some demand on vehicular ownership.  This was something that did not fit into the "strategy" of the investors.  There are several who thought that Elon has lost his plot at this juncture after the delay of the $25,000 Tesla.

3.  Optimus Humanoid 

Subsequently, Elon mentioned that "Optimus can be bigger than the automotive division and even bigger than the robotaxi".

This was probably another item that investors could not comprehend.  Most of us have mentally tagged Tesla to their vehicles and could not comprehend the potential of other products that could surpass the cars.  At this point, we may need to recalibrate our lens, seeing Tesla as a "technology (AI) and innovative company that is committed to a better and sustainable future".  In fact, most of us have probably forgotten that Elon mentioned that the energy business (solar & storage) could potentially be bigger than the automotive division.  Currently, it could be hard for us to accept as the automotive are making bulk of the news.  However, there are not many times when Elon was wrong about such matters.

Conclusion

In conclusion, I think that Tesla's automotive business will continue to drive bulk of the revenue, profits and news coverage in the near future.  However, FSD and Optimus could well be game-changers themselves.  It is exciting to learn that Tesla's innovation are changing lives for the better.  Tesla is not just another car maker but is also improving our lives in AI (Neural link, Optimus and FSD), safety (FSD), protection (insurance), sustainability (solar and energy storage) on top of other solutions that they are developing (Dojo, HVAC, 4680 batteries, etc).  This means that Tesla will have more than 1 source of income.  They are developing multiple solutions leading to more revenue, profits in a better & sustainable world.  

Please do your due diligence but this may be another golden chance to load up on our Tesla shares.