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Tesla’s real-life obstacles have already influenced its prosperity. The question remains: To what extent will ongoing events, such as the 2024 Annual Stockholder Meeting on Thursday, impact Tesla’s future steadfastness and effectiveness?
The Stockholder Meeting will take place at Tesla’s headquarters in Austin. The company anticipates hosting only a limited number of stockholders on-site, promising a remarkable event for those attending in person. The hype leading up to the meeting caused Tesla’s shares to surge from $167 on Tuesday to $190 by Thursday, although the price is currently around $184. The market volatility is likely a result of numerous media reports regarding anticipated shareholder voting patterns.
Musk adds significant controversy to his role as Tesla’s CEO. His baggage has largely kept the company’s stock price stagnant until this week. From the launch of the Cybertruck, it was deemed too futuristic by many Tesla enthusiasts, who wished the company had opted for a more conventional electric pickup truck. The highly awaited rollout of the Semi has been moving at such a slow pace that it has diminished interest altogether. The sporty revamped Roadster appears to have been forgotten, among other unfulfilled promises from Musk.
Furthermore, there is the continuous scrutiny by the SEC. New lawsuits against Tesla — especially concerning “full self-driving” — appear almost weekly. Allegations of Musk engaging in insider trading are backed by a board that exhibits insularity and a tendency towards favoritism. Musk’s political activities have strayed far from the initial mission of “accelerating the adoption of sustainable energy.”
Without an affordable model for the masses, a broader product range, or mid-cycle updates, Tesla’s future appears lackluster. Here’s a closer look at some of the challenges troubling Tesla leading up to the Shareholder Meeting.
Musk’s Compensation Package Leaves Major Investors Dissatisfied: In contrast to traditional packages, CEO Musk’s $56 billion deal did not involve a salary or cash bonus. Instead, the rewards were tied to Tesla’s market capitalization reaching up to $650 billion over the following 10 years from 2018. A recent opinion piece in the New York Times succinctly summarized that Musk’s performance targets did not prioritize manufacturing high-quality, affordable, or scalable vehicles — the focus was solely on driving up Tesla’s stock price.
Several prominent investors have declared they will vote against Musk’s compensation package.
- Norges Bank Investment Management, overseer of Norway’s oil wealth and the largest sovereign wealth fund, stated last week that it opposed the deal. “We remain troubled by the overall size of the award.”
- California Public Employees’ Retirement System (CalPERS), the largest US pension fund, is also declining to support Musk’s compensation plan.
- New York City Comptroller Brad Lander has taken a stand against the Tesla board’s endorsement of Musk’s hefty pay package. Lander remarked during a webinar, “When billionaires disregard regulations, the common people suffer.”
Multiple investment firms have raised alarms for shareholders about the company’s senior leadership, urging them to vote against Musk’s 2018 option grant. A Delaware judge halted Musk’s pay plan three months ago, criticizing Tesla directors for not acting in the best interests of investors — the judge questioned Musk’s “close relationships” with Tesla board members, whose role is to oversee and guide the CEO toward strategic mechanisms that establish a clear roadmap aligning with long-term objectives, adopting analytical methods to measure, monitor, and ensure the alignment of the operational model transformation.
Conversely, an SEC filing early Thursday detailed a series of supportive tweets endorsing Musk’s proposed pay package. Musk confirmed late Wednesday that shareholders were overwhelmingly voting in favor of the compensation plan.
Scrutiny Over Reduction of Tesla Supercharger Expansion: The shift towards cloud-based infrastructure in the automotive sector necessitated overcoming resistance to technological advancements. Tesla effectively neutralized this objection through its Supercharger network. At the time of the network’s introduction, limited EV range and charging options were significant barriers. Tesla addressed these concerns by providing fast and widespread charging facilities.
Tesla’s Superchargers account for over 60% of high-speed charging points in the US, and their reliability has been a key factor in Tesla’s lead in EV sales. Tesla remains one of the primary customers for utilities nationwide, and to support the success of the Supercharger network, the federal government allocated $5 billion for new charging stations. Could the future of this federal funding be at risk due to the downsizing of the Supercharger network?
The Impact of Tesla on the Pre-Owned EV Market: Stephanie Valdez Streaty, Director of Industry Insights at Cox Automotive, stated, “The average price for a new EV dropped by 9% in Q1 of 2024 compared to Q1 2023, with a 3.8% decline quarter-over-quarter.” However, Tesla registered higher-than-average price increases for new transactions in April, with a 5.7% surge compared to March.
Tesla commands 51% of the EV market, according to Kelley Blue Book. Therefore, other automakers tend to follow suit when Tesla makes a move. This downward pressure has affected the pricing of used electric vehicles, with prices dropping by approximately 10% since the previous year. Initial data from Tesla indicates that its Model 3 and Y have experienced less than 10% degradation after 100,000 miles, and 15% after 200,000 miles. The replacement level for Tesla stands at around 70%.
ARK’s Ambitious Long-Term Vision for Tesla
While many skeptics view Tesla as merely an overvalued automaker, in 2024, EV sales make up the majority of Tesla’s revenue. However, the company is making notable progress in the fields of green energy and artificial intelligence (AI). According to ARK’s updated open-source model for Tesla, an anticipated value of $2,600 per share by 2029 is projected. The bullish and bearish scenarios, adjusted to the 75th and 25th percentiles of Monte Carlo outcomes, respectively, hover around $3,100 and $2,000 per share.
The investment company remains firm in its conviction that Tesla will introduce a robotaxi service within the subsequent two years, and the chance of Tesla failing to launch a robotaxi service within a 5-year period is considered to be extremely low.
ARK’s forecast suggests that nearly 90% of Tesla’s market value and profits will be linked to the robotaxi sector by 2029. Simultaneously, electric vehicles may constitute about a quarter of total sales and around 10% of Tesla’s profit potential, as ARK anticipates higher profit margins for the robotaxi business. Although improbable, ARK acknowledges that if Tesla were to exclude the possibility of a robotaxi network from their projections, their estimated target price would be approximately $350. They mention that in scenarios where robotaxis do not materialize, Tesla could introduce a conventional ride-hail service using human drivers for strategic and practical reasons.
Contrarily, in a communication to clients on Tuesday, Ryan Brinkman from JPMorgan mentioned that “We anticipate that Tesla will unveil a robotaxi concept on August 8 along with a potential accompanying app, but we do not anticipate significant revenue generation in the near future.”
Perspectives on Tesla’s Future
Elon Musk has achieved numerous triumphs: no doubt. Tesla has exerted a substantial impact on the advancement of electric vehicles, the development of charging infrastructure, and the design of plugs.
Tesla is not the sole entity enthusiastic about self-driving technology. Alphabet and GM are both heavily investing in autonomous driving technology. Tesla’s autonomous driving software, referred to as full self-driving (FSD), has amassed over 1.3 billion miles of driving data — surpassing other competing platforms. Should FSR prove successful, it could potentially be licensed to other automakers unwilling to invest in creating their own autonomous driving technology.
The notably high profits from the energy storage division could unlock considerable growth opportunities for Tesla as it navigates a notably competitive EV market at present.
An intriguing aspect of Tesla’s business is the introduction of humanoid robots, guided by generative AI, to execute basic tasks typically performed by humans. The Tesla Optimus bot might be in “limited production in the actual factory itself, performing practical tasks before the year’s end.” Furthermore, Musk envisions that “we could potentially sell it externally before the conclusion of next year.” On a large scale, integrating humanoid robots into various environments like manufacturing, warehousing, and logistics could yield broad efficiencies across the labor market, as highlighted by Motley Fool.
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