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Tesla's stock price has experienced a sharp decline, falling by 20% in just two days, resulting in a loss of over $7 billion in market value and a drop of as much as 13%. According to its financial report, Tesla recorded a net loss of $330 million in the first quarter of 2017, continuing its streak of losses for over a decade. This situation has raised concerns, reminding people of the struggles faced by LeTV, a Chinese tech company that is on the verge of collapse. Is Tesla, the leader of the electric vehicle industry, heading down the same path as LeTV? Let’s explore this issue with insights from our automotive electronics editor.
The stock price of Tesla had once soared early this year, surpassing both Ford and GM in April to become the most valuable car company in the U.S. However, the good times didn’t last long. Following the official launch of the Model 3, Tesla faced one of its biggest declines in the U.S. stock market, with its share price dropping 7.2% to $327.09. While some investors remain optimistic about the production plan for the Model 3, Goldman Sachs has expressed concerns regarding Tesla’s sales performance. Analysts believe that the Model 3 may struggle to meet its production targets, and profit margins are not looking promising.
Despite having a range of mature electric vehicles, CEO Elon Musk is often seen as a visionary who takes bold risks. However, his methods of raising capital have raised eyebrows among many investment banks. Musk has mortgaged his shares, taken loans, and used the money to repurchase company stocks and bonds, which in turn is used to fund other ventures. He also owns three "unicorn" companies: SolarCity, SpaceX, and Tesla. All three are known for their high spending and slow progress toward profitability. Musk has often relied on personal guarantees to support these companies, essentially providing them with financial blood transfusions.
In reality, very few executives would mortgage their shares to secure personal loans, as it can create conflicts between their interests and those of shareholders. If the stock price drops, it could trigger a margin call, forcing the executive to sell shares or add more collateral. This could further depress the stock price and create a negative cycle.
Despite this, Musk remains unconventional and doesn’t seem overly concerned about short-term stock fluctuations. For a company that started at $20 per share, reaching over $300 is a significant achievement. Investors have come to expect volatility, and Tesla’s high stock price has been seen as an opportunity for betting. For Musk, the brand recognition he has built and the successful launch of the Model 3 serve as strong endorsements, helping Tesla continue to attract funding.
Musk is a dreamer and an adventurer, and Tesla, the company he founded, has never stopped dreaming and taking risks. From the Roadster to the now more affordable Model 3, Tesla has never turned a profit, yet its financial chain has remained intact. Through repeated doubts, it has established a complete manufacturing plant, built a battery factory, and created over 5,400 superchargers worldwide. It has also delivered the Model S and Model X, proving its ability to mass-produce reliable electric vehicles.
As Tesla’s stock price fluctuates, some investors begin to question whether the company will face a similar fate as LeTV. However, with the Model 3 now in production and plans for a new electric truck on the horizon, Tesla continues to build a solid foundation. Combined with Musk’s charismatic leadership and legendary background, the company remains attractive to investors. Even if Musk uses unconventional methods, it hasn’t stopped Tesla from growing, and its future still looks promising.
People tend to celebrate success and ignore failure. While Musk faces challenges, he remains determined to change the world through electric vehicles. In contrast, Jia Yueting, the founder of LeTV, is now facing a crisis after years of rapid expansion and heavy investment. Once a symbol of innovation, LeTV is now struggling with unpaid salaries, frozen assets, and a broken capital chain.
In China, LeTV’s empire, once impressive, is now full of cracks. In the past, news around LeTV was all about conferences, cross-border partnerships, fundraising, and high spending. Now, the headlines are about executive departures, unpaid wages, and a collapsing capital chain. LeTV, which has never managed to break even, is being dragged down by multiple business lines and is on the brink of collapse.
Throughout the history of the automobile industry, even major players like Toyota, GM, Chrysler, and Fiat have faced bankruptcy threats. Building a car brand requires billions in investment, and steady cash flow and profitability are essential for long-term survival. LeTV, however, ignored these fundamentals, overestimating its capabilities while underestimating the risks involved.
Unlike Musk, who invested heavily in core technologies like battery management, Jia Yueting overlooked the importance of building a sustainable industrial structure. As a result, LeTV found itself in a precarious position. Today, Jia Yueting and his wife have had their assets frozen, and despite promises to repay debts and produce the FF91, many doubt whether these commitments will ever be fulfilled.
The concept of an “internet car†is speculative, and while Tesla succeeded, it doesn’t guarantee that others will follow. As the saying goes, “Drowning is all about swimming.†The underlying message is that you can't swim faster and die faster. Whether Tesla will survive or fall like LeTV remains to be seen, but its journey so far shows resilience and ambition.
This article explores the challenges Tesla faces and draws comparisons to LeTV’s struggles. For more updates and detailed information, stay tuned to our automotive electronics section.