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Tesla's stock price dropped by 20% in just two days, wiping out over $7 billion in market value and shrinking by as much as 13%. According to the financial report, Tesla recorded a net loss of $330 million in the first quarter of 2017, continuing its streak of not turning a profit for over a decade. This crisis has raised concerns, drawing comparisons to the downfall of LeTV, the Chinese electric vehicle company. Could Tesla, the leader of the internet car movement, be following in the same footsteps? Let’s take a closer look at what’s happening with the car electronics team.
The image above shows a dramatic drop in Tesla’s stock price, raising questions about the company’s future. At the beginning of the year, Tesla's stock was soaring, even surpassing Ford and GM in market value, becoming the most valuable car company in the U.S. However, this success didn’t last long. With the official launch of the Model 3, Tesla faced one of its biggest declines in the U.S. stock market, with shares falling 7.2% to $327.09. While some investors remain optimistic about the production plan for the Model 3, Goldman Sachs has expressed concerns about Tesla’s sales performance. Analysts believe that the Model 3 may struggle to meet capacity goals, and profit margins could be under pressure.
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 securing funding have sparked doubts among investment banks. Musk has mortgaged his shares, taken loans from the bank, and then used those funds to buy back company stocks and bonds, effectively using company money to support other ventures. He also owns three “unicorn†companies: SolarCity, SpaceX, and Tesla — all of which are known for high spending. Musk has relied on personal collateral to keep these companies afloat, essentially providing them with "blood transfusions."
Such practices are rare among executives, as they can threaten other shareholders and create conflicts between personal interests and company goals. If the stock price drops, it could trigger a margin call, forcing Musk to sell shares or add more collateral. This could further depress the stock price, creating a dangerous cycle.
Despite these challenges, Musk remains unconventional and seemingly unbothered by stock fluctuations. For a company that started at $20 per share, reaching over $300 is a significant achievement. Investors have become accustomed to Tesla's volatility, viewing its high stock price as a bet on the future. Musk’s brand influence and the successful launch of the Model 3 provide strong backing for continued financing.
Musk is a dreamer and an adventurer, and Tesla, which he founded, has never stopped dreaming and taking risks. From the Roadster to the now more affordable Model 3, Tesla has never been profitable but has maintained its capital chain. Through repeated doubts, Tesla has built a manufacturing plant, a battery factory, and over 5,400 Superchargers worldwide, delivering mass-produced models like the Model S and Model X.
When Tesla's stock price fell, some investors began questioning its future, especially after delays in producing the Model 3. Now that the Model 3 has officially launched and started production, along with the upcoming electric truck business, Tesla is well-positioned to attract more investment. Even with Musk’s unconventional methods, Tesla continues to expand, and its future remains promising.
While Musk faces risks, he remains determined to change the world through electric cars. In contrast, Jia Yueting, the founder of LeTV, is facing a desperate situation. Once a booming tech giant, LeTV is now plagued by executive resignations, unpaid salaries, and a broken capital chain. Its ambitious expansion into multiple sectors has left it in a critical position.
In the history of the automobile industry, many traditional automakers like Toyota, GM, and Chrysler have faced near-bankruptcy. Building a car brand requires billions in investment and steady cash flow. Tesla, despite its losses, has managed to secure funding and develop key technologies, such as battery management systems, which are crucial for its products.
Jia Yueting underestimated the challenges of building a car brand, ignored financial risks, and failed to produce mass-market vehicles. His overestimation of his own capabilities and lack of technological development led to LeTV’s current crisis. Unlike Musk, who focused on core technology, Jia Yueting prioritized rapid expansion, leading to instability.
Today, Jia Yueting’s assets are frozen, and he continues to promise repayment to suppliers and investors, claiming that the FF91 will be produced soon. But for a company with a broken capital chain, these promises may seem like empty assurances. The concept of an “internet car†is a speculative idea, and while Tesla succeeded, it doesn’t guarantee that others will follow.
In conclusion, Tesla's journey reflects both innovation and risk. While it has faced setbacks, it has also demonstrated resilience. The story of LeTV serves as a cautionary tale, highlighting the importance of financial discipline and technological focus. As the automotive industry evolves, only those who balance ambition with practicality will succeed.