In recent years, tycoon Elon Musk has become a celebrity in the world of innovation dreamers and climate change activists with his fully-electric Tesla cars and SpaceX programs. Another lesser-known project of Elon Musk, the Tesla Solar Roof, has been attracting a lot of attention for another reason: its inefficiency. If you consider purchasing into Tesla’s stock any time in the near future, you should know whether it will be worth it.
Purchasing Tesla’s stock was once a lucrative venture, but the company has not been doing great on the market lately. With many issues and empty promises, Tesla’s poor rollouts and general performance have stagnated the company’s development.
Tesla might turn their outlook around. The company is always innovating and pushing for new ideas. It is unlikely that the company is going to see a total failure any time soon. However, buying Tesla stock at this time is a risky move, considering how volatile the company’s performance has been of late. Read on to learn more about whether Tesla stock is worth it.
Problems with the Solar Roof
Tesla’s Solar Roof is a product of another Musk ambitious dream of clean green energy. Once Musk’s cousin’s company SolarCity, in 2016, it became part of a larger Tesla corporation that has become known for its luxury-class fully-electric vehicles.
Tesla’s innovative and extremely popular product, the Tesla electric vehicle, introduced humanity to many concepts that seemed to come from sci-fi only a decade or two ago: a fully electric motor, decent range on a single battery, or the advanced autopilot system.
The Solar Roof project could become another dream-come-true technology. However, the initial acquisition of SolarCity caused a dip in stock prices for a few reasons:
- SolarCity had a large amount of debt that Tesla took on.
- Investors were unhappy with the decision.
- The tension caused by the decision was no secret.
These factors had a large impact on Tesla stock in 2016 when SolarCity was purchased, and the Solar Roof was produced. Since then, the Solar Roof has had its own share of problems as a product.
High Solar Roof Prices
Tesla’s Solar Roof technology is not like the old-school solar panel roof. It is quite common to see companies that install solar panels that then are wired to your house’s electric grid. Instead, Tesla’s roof uses active solar shingle tiles that are being integrated with inactive shingles, so your roof does not actually look like it has solar panels. Instead, solar tiles are being combined with regular tiles.
While it makes your roof look more normal than regular solar panels, it is more expensive than just installing solar panels.
- The cost of inactive shingles then varies between $14 and $19 per square foot.
- Active solar shingles cost $2 per watt of energy that your household uses.
While these prices are lower than other solar shingles companies provide, they are still a lot higher than just installing solar panels. Plus, these prices do not include the Powerwalls, the installation, and maintenance that are required. These prices can become overwhelming once totaled. The Solar Roof drawbacks do not end here.
Why Are Bills Rising?
Solar Roof customers were once given an optional Powerwall battery to store the energy gained by the roof. However, Tesla later changed the terms and is now requiring a Powerwall battery to be installed with the roof, skyrocketing the price of the roof.
- Some customers that ordered their roofs years ago have seen their bill double, just as one customer paid $35,000 at the time of purchase, shortly after receiving a message that his bill came up all the way to $75,000.
- In some cases, imperfections of a roof that were not considered during the initial inspection make initial estimates double or triple.
Tesla has been refunding customers who are unhappy with their bills rising so much, but this does little to upkeep the reputation of the company that has been plummeting because of the project.
Additionally, Musk admitted “significant mistakes” were made in planning the Solar Roof rollout. Tesla has trouble keeping up with the high demand and has to raise its prices to keep up.
Tesla Customer Dissatisfaction
While Tesla has trouble attracting new clients for their Solar Roof project, the problem might be in existing customers, who are often left dissatisfied with their services.
Social media are full of testimonials from existing customers who are claiming that Tesla has been unreliable in their services. As such, customers report that Tesla has been canceling existing orders for Solar Roofs, even those that were made years ago.
These sudden cancelations lead to even more unhappy customers.
The Solar Roof project is being surrounded by controversies and unkept promises. Back when the project was launching, Tesla promised to offer three types of tiles:
So far, in 2021, they keep on offering only one: asphalt.
It is fair to say now that many promises that the ambitious project creators made back in the day still remain unkempt, and there is no indication that this might change in the near future.
These broken promises contribute to decreased investor interest in Tesla Solar Roof. The project is bugged by multiple issues, and potential profit from investments is not even the largest issue for now. With promises being broken, bills rising unexpectedly, and dissatisfied customers, poor service, and canceled projects, investors are hesitant to believe that Tesla can make Musk’s ambitions become real.
Demand for Solar is Still High
Still, while the Solar Roof continues to struggle to reach its target, the demand for household solar energy continues to increase. Installations have increased 13 times over in the last decade and only continue to rise.
While Tesla continues having trouble reaching its target, demand for household solar energy continues to increase. Installations have increased more than 20-fold in the last decade and only continue to rise.
- Customers want a cleaner energy source.
- Customers want to save money on their electric bills.
- Customers want to have freedom from the energy grid.
For a while, Tesla and their subsidiary SolarCity were the number one providers of these services but suffered a big hit in the last years, being replaced by their primary competitor Sunrun that recently bought Vivint, another provider of solar panels, and Tesla continues to fall behind the competition. If Tesla cannot stay afloat amid competition, stocks will continue to drop.
Why Are Tesla Shares Dropping?
It seems at first glance that Tesla has just hit yet another temporary barrier in their struggle for innovation and a cleaner planet, which has certainly happened before. The company has managed to climb out every problem that Tesla has encountered so far.
However, in 2021, the current situation with Tesla indicates that Elon Musk and his ambitious and even daydreamy projects might be heading into a more serious crisis than ever before.
Issues with Solar Roofs and many news and testimonials heard in recent months have definitely contributed to Tesla’s performance on the stock market. However, Tesla is not a solar energy products manufacturer in the first place. It is a car company, and Tesla’s automotive division has not been having an easy time in April and May 2021. The primary reason for this can be found overseas.
Tesla has been heavily relying on the Chinese market, where Tesla has begun to see real competition rising. When Tesla was one of the few electric vehicle (EV) manufacturers in the world, their competition was slim and limited to mostly concept projects like the Chevy Volt or Nissan Leaf.
With Chinese car manufacturing on the rise, Tesla is finally up to a serious battle. Three Chinese electric vehicle companies saw a breakthrough in the last 12 months. As a result, the three companies increased their sales:
- Li Auto
Tesla’s sales in China, on the other hand, plummeted, going down from 35,000 sold cars in March 2021 to a disturbing 26,000 cars in April 2021. Such a stark 25 percent decrease could not have gone unnoticed by the stock market.
Competition is Here
2020 was a breakthrough for Chinese manufacturers on many fronts. Take Xpeng as an example. The company has only sold about 50,000 cars since the start of sales. Nevertheless, the manufacturer started the construction of a new factory in Wuhan as recently as April 2021, and that is an addition to their new construction in Guangzhou that started in September 2020.
While the projected output of the latter is unknown, the factory in Wuhan is expected to produce up to 100,000 cars yearly, which is a significant step forward for a company that has sold about 50,000 cars in its lifetime.
The Chinese market is a primary battlefield now. In addition to being the largest car market overall, China has become the largest market for electric vehicles too, so Tesla’s underperformance there can be a serious problem for their performance on the US stock market.
Other Car Giants Are Keeping Up
The Tesla car is definitely one of the most innovative products of the last decade. While the concept of an electric car predates even Ford Model T, the development and construction of a viable electric engine and a battery were hard enough to halt the potential appearance of massive electric vehicle production.
However, since the Tesla Roadster, the first Tesla on the market was released in 2008, car giants like Ford and GM started to see that electric vehicles are worth looking into. Tesla was far from being the only electric car on our roads, we can also spot a rare Nissan Leaf or BMW i5, but that is about to change.
Every mainstream car manufacturer now has at least a concept of a new electric vehicle, and they look more attractive than the controversial Leaf or i5. Expected to be released as soon as this year, Audi has introduced a whole line-up of Audi e-tron electric vehicles that will include:
- An electric SUV Q4
- A Q4 Sportback
- An A6 sedan
BMW and Chevrolet are expected to expand their electric car line-ups with more presentable models. Ford is about to launch their F-150, an all-electric pick-up truck.
Tesla might have been a pioneer of all-electric vehicles back in the day. But now renowned car manufacturers see a potential gold mine in the all-electric market, especially since more and more countries commit to net-zero emissions plans.
These emission reduction plans can seriously affect Tesla, both in positive and negative ways.
Another Growing Market
In early May 2021, NIO, one of three Chinese EV producers, announced that it had reached a deal to ship its vehicles to Norway. Norway might not seem like a big deal too. However, Scandinavian countries have been very serious about implementing their policies to reach the net-zero carbon emissions goal as soon as 2030, less than 10 years from now.
Electric vehicles, thus, have been on the rise in Norway, and while Tesla was a dominant force, their sales were protected by the lack of serious competition. Now their rivals do not only attack Tesla on their land, but they also spread their influence to Tesla’s backyard as well. None of that, obviously, helps Tesla’s stock market performance.
Supply Cannot Keep Up with Demand
Increased competition might not even be Tesla’s largest problem today. Another issue troubling the company is its low supply of semiconductors. 2020 brought on more than just the pandemic. The related lockdowns across the world boosted sales of many technological items to help people cope with life at home:
- Graphics cards
- Internet infrastructure
Also, 5G technologies are being introduced into our lives. This is where the trouble comes: all of these pieces of technology require special semiconductors. These are the same semiconductors that are used in graphics cards that are being brought in huge quantities for cryptocurrency mining. This activity is on the rise, ironically, because of Musk’s unusual interest in $DOGE, in particular.
These semiconductors are needed for Tesla vehicles, as well. They are installed in electric vehicles, including Tesla. When all of the semiconductors are being bought up, demand cannot keep up.
In February 2021, Tesla already had to shut down one of their factories in Fremont, California, due to “parts shortages,” according to Musk’s Twitter post. Although the factory was only shut down for two days, it did not go unnoticed, and the speculation on the shortages of semiconductors has been hurting Tesla’s market performance ever since.
Stock Market in Q2 2021
If all of the specific Tesla trouble is not enough to shake the company’s stock prices, there is more to consider. All EV stocks have been doing poorly in the last few months due to the state of the global economy as a whole. This is due to many COVID-19 restrictions being lifted.
As the COVID-19 pandemic ravaged across the world in full force, the financial market saw a serious influx in cash. With low inflation from reduced economic activity overall, the cash flow had a lot more power than it has, with inflation being on a normal level.
After the initial drop at the start of the pandemic, the NASDAQ index saw a close-to-100 percent increase in only a few months and even compared to the pre-COVID level, NASDAQ has risen almost 50 percent by May 2021.
Getting Back to Normal
Now, as the restrictions that were triggered by the pandemic are being slowly lifted, and the economic activity is coming back to normal, investors are hesitant to keep their cash flow going since increasing inflation depreciates their investments. As life starts to get back to normal, the stock market is going back to its normal level, and the current index is too high for “peacetime.”
- On January 26, 2021, Apple’s stock was worth $143.
- On May 12, 2021, Apple’s stock was down to $122.
The primary victims are tech giants, like Tesla.
Are Consumers Ready for EVs?
The stock market can also be responding to the overall troubling development of electric vehicles. As the hope for substituting our normal internal combustion engines for the clean alternative rises, the demand for continuing innovation stays just as high as when Tesla was just launching.
Electric vehicles might be the future of our transportation, but progress has been inconsistent in the last few years:
- Batteries in electric cars still can barely compete with gas tanks when it comes to range.
- Charging time of almost one hour is frustrating compared to a quick five-minute pit stop for gasoline.
The availability of Tesla Superchargers and other charging stations continues to be an issue that halts EV sales. Finally, while electricity is generally a better and cleaner alternative for oil-based fuel, it is not limitless, so the rise in electric cars will inevitably lead to electricity shortages.
The situation that we are in right now might indicate that Tesla is indeed in serious trouble. The performance on the market has not only been decreasing because of Musk’s ambitions but because the world is picking up on his ideas, and the competition becomes too real for Tesla and its products.
But, even with competition aside, Tesla’s Solar Roof subpar performance and drastically increasing customer dissatisfaction seems to be the prevalent reasons why Tesla stock will keep on performing poorly this year. Unless the Solar Roof comes up with a viable development strategy, you may proceed with hesitation when considering Tesla Stock at this time.