A Model Y electric vehicle is pictured during the start of production at Tesla’s “Gigafactory” on March 22, 2022 in Grünheide, southeast of Berlin. – American electric car pioneer Tesla received the green light for its “gigafactory” in Germany on March 4, 2022, paving the way for the start of production shortly after an approval process plagued by delays and setbacks. (Photo by Patrick Pleul / POOL / AFP) (Photo by PATRICK PLEUL/POOL/AFP via Getty Images)
Patrick Pleul | Afp | Getty Images
It’s been a painful few months for short sellers, as Tesla shares have surged 73% since hitting a year-to-date low in April. After closing at $246.39 in short-term trading on Wednesday, the stock is just over $2 away from recouping its year-to-date losses.
Short interest in Tesla currently stands at 3.5% of the float, or 97 million shares shorted, with a par value of $22.4 billion.
Tesla on Tuesday reported second-quarter deliveries of 443,956, beating Wall Street estimates of 439,000. Deliveries fell 4.8% from a year earlier, but the drop was not as steep as the 8.5% year-over-year decline in the first quarter.
While the delivery report showed demand for Tesla vehicles is still higher than feared, it offered only limited insight into the company’s performance.
Tesla is struggling with declining auto sales due to an aging lineup and fiercer competition than ever before. That’s why Tesla has been encouraging electric vehicle purchases for months with discounts, low- or no-interest financing options and other incentives.
In the second quarter, for example, Tesla cut prices in Germany and Norway and offered zero-interest loans in China, even on its entry-level Model 3 sedan and Model Y SUVs. In the U.S., Tesla offered a three-year financing deal with 2% APR for buyers of its rear-wheel-drive Model 3.
Meanwhile, Tesla’s latest model, the angle-steel Cybertruck, has gotten off to a slow start, with quality issues prompting four voluntary recalls in the U.S. in less than a year.
A Tesla Cybertruck sits in a parking lot at a Tesla dealership in Austin, Texas on April 15, 2024.
Brandon Bell | Getty Images
Tesla’s earnings report later this month will give a clearer picture of the company’s financial health. Analysts expect revenue to decline 2.9% to $24.2 billion, according to LSEG, after a 9% decline in the first quarter.
“It is clear that the financing promotions on both the Model Y and Model 3 have driven significant volume growth, but as we have seen with other significant price cuts and discounts, demand is being pulled forward and new demand must be created in the third quarter and beyond, which has proven challenging over the past 18 months,” Ronald Jewsikow, an analyst at Guggenheim Partners, wrote in a note to clients on Wednesday. He has a sell rating on the stock.
Tesla CEO Elon Musk, whose net worth has increased by about $15 billion in the past two days, celebrated the blow short sellers are taking. That included a personal attack on Microsoft co-founder Bill Gates, who has a history of shorting the stock and taking issue with Musk.
“Once Tesla fully solves autonomy and gets Optimus into mass production, anyone still short will be wiped out,” Musk wrote in a post on X. “Even Gates.”
Optimus is Tesla’s humanoid robot that is currently in development. Musk has claimed that these robots will one day turn Tesla into a company worth tens of trillions of dollars. Tesla’s market cap is currently under $800 billion.
Meanwhile, Tesla’s core business, the automotive sector, continues to face challenges.
The company regularly rolls out improvements to its in-vehicle software, and a new update promises to bring YouTube, Amazon Music, and weather and air quality apps to drivers’ infotainment systems. But Tesla still hasn’t delivered software that can turn its existing cars into self-driving vehicles.
In addition, a recent Axios-Harris poll found that the company is facing a deterioration in its brand, at least in part due to Musk’s “antics” and “political tirades.” A New York Times survey released this week also said that Musk’s “polarizing statements” and “political activities” are driving away some “left-leaning consumers.”
Musk has called for a “red wave” in the upcoming US election and has said that he and former President Donald Trump speak regularly. He has also shared, liked and promoted far-right accounts and content on X. Electric vehicle advocates, on the other hand, tend to lean left politically, according to research from Pew Research and Gallup last year.
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