What does the stock weigh?

Shares in Tesla fell by as much as 8% on Friday morning. They have since rebounded and ended at less than 4% as the markets recovered dramatically late on Friday, but the stock has still lost more than 15% of its value throughout the year, ending for the first time since December 4. under $ 600.

Here are some of the biggest factors weighing down on the cult share and knocking the world’s richest crown off Elon Musk’s head – the CEO owns about 22% of Tesla stock.

On Thursday, Fed Chairman Jerome Powell said “upward pressure on prices” and “temporary increases in inflation” could come to the US as the economy reopens after a year of Covid restrictions hitting businesses across the board.

The market is now concerned that interest rates will rise and that the FBI will not take or even control aggressive policy action. Bond yields are rising.

This causes a broader correction in technology stocks, which are valued based on the assumption of strong growth in future cash flows. As inflation increases, the value of those future cash flows decreases. As CNBC previously reported, the Nasdaq 100 list of the 100 largest non-financial stocks on the stock market is down about 8% from the historic highs hit three weeks ago.

This affects most tech giants. For example, Apple is down from about $ 129 to $ 121 in the year so far, and Netflix is ​​down from about $ 523 to $ 516. But Tesla’s decline has been faster so far.

Some of Tesla’s largest and most vocal backers have cashed in on some of their shares and are finally beginning to recognize the electric vehicle attack as a real challenge for Tesla.

For example, Ron Baron sold 1.7 million worth of Tesla shares and invested in two of the company’s biggest potential rivals, Cruise-owned by GM and Rivian, backed by Amazon, saying paradoxically that he expects Tesla shares will eventually rise to $ 2000.

Former Tesla board member Steve Westly said on CNBC’s Power Lunch this week that while he remains optimistic, “Tesla will not be king of the hill in electrical energy forever.” He added, “They will have competition from all sectors. They will have to double to compete.”

Indeed, carmakers, including Ford and Volkswagen, have had early success selling their electric vehicles, including the Mach E and ID.3, against Tesla models in the US and Europe.

Meanwhile, upcoming EVs, including the all-electric version of Ford’s F-150, the Lucid Air, Rivian’s electric SUVs and trucks, and others are exciting. Yesterday, Porsche showed off the production version of its Taycan Cross Turismo and said it would start selling in the US this summer. It’s a $ 90,000 EV car, a more affordable, practical take on Porsche’s performance EV, the Taycan.

Due to a shortage of semiconductors, most car manufacturers have temporarily closed some lines in their factories, and Tesla is no exception.

Tesla CEO Elon Musk acknowledged the company’s Fremont, California plant was temporarily shut down due to “parts shortages” in a tweet on Feb. 25. He said it had only been closed for two days, but did not clarify whether partial shutdowns would continue on some lines.

Tesla had previously warned in its Q4 2020 earnings call and filing that chip shortages could hamper their vehicle production targets in the first half of 2021.

CFO Zachary Kirkhorn said during the investor call that for the first quarter of 2021:

[Model] S and X production will be low due to the transition to the recently redesigned products. In addition, we are working extremely hard to overcome the global semiconductor shortage and gate capacity, which could have a temporary impact. “

If Tesla didn’t manufacture a large number of vehicles, due to parts shortages or delays in shipping parts from overseas to its US factories, the company wouldn’t generate as much legal credit as it wants. Tesla sells these environmental credits to other automakers, and that’s how it historically achieved profitability.

Controlling costs has been on and off CEO Elon Musk for years.

In December 2020, he wrote in an email to all Tesla employees, “ Investors give us a lot of credit for future profitability, but if at any point they conclude that that’s not going to happen, our inventory will immediately be crushed. soufflé under a sledgehammer! “

But at the same time, Tesla is engaged in an expansion that will cost a lot. The EV maker is building factories in Austin, Texas, in Brandenburg, Germany and expanding its footprint in China. It has also begun to revamp aspects of its Fremont facilities, including the paint shop, which is the part of the factory where its cars are painted.

Musk also has ambitions for Tesla to mine its own lithium domestically. And to ramp up production of Tesla’s own battery cells at a pilot plant, also in Fremont.

Aside from these efforts, the company is in the midst of costly recalls and could face more – either voluntary or mandatory. Most important of these voluntary recalls, in China and the US, is recalling Tesla Model S and X vehicles with touchscreen defects.

Jessica Bursztynsky contributed to this report.

Correction: Tesla finished 3.78% lower on Friday.