Why Investors Are Avoiding Tesla Stock

Once, Tesla's automotive vehicles seemed like the future of the automotive industry. Tesla's stock prices reached $409.97 in 2021 when hype around the vehicles peaked. However, by January 2023, Tesla's stock had plunged to $108.10. The price reflects Tesla's free fall throughout 2022 that made the once-popular investment a risky bet.

Some might seize the opportunity to buy Tesla stock before it potentially rises again. Others are abandoning their investments as they study the factors that tanked the company's market value.

Factory Issues

According to Barron's, Tesla's December discounts suggested that sales are decreasing. Reuters notes that supply chain issues have hampered production while sales aren't keeping up with the existing vehicles. COVID-19 lockdowns in China, which buys more cars than any other country, have led to an economic downturn. Global supply chain issues and rising interest rates have compounded Tesla's struggles.

In December, Tesla's stock took another hit when the company's Shanghai factory cut hours and halted the hiring process. Time reports that investors worry that Tesla relies too much on China for sales, causing another drop as Chinese drivers buy fewer electric vehicles.

Declining Interest

Tesla's plunge coincided with Elon Musk's Twitter takeover, the latest in a series of controversies that shifted Musk's public image. Many consumers have turned to competitors, such as Ford and General Motors, who offer electric vehicles. Some vehicles are eligible for tax credits and rebates that make them more affordable.

CNBC reports that energy prices in Europe have skyrocketed, which could make drivers reluctant to buy electric cars. While Tesla offers incentives to buyers, these rebates aren't enough to keep Tesla's stock afloat. Researchers predict that Tesla's sales and stock prices will continue to drop.

Overall, professional investors might advise their clients to avoid Tesla stock or sell their existing shares.