The Tesla (NASDAQ:TSLA) share price has more than doubled in 2023. The company has a dominant position in the electric vehicle market and unrivalled potential opportunities for growth.
While there’s uncertainty around robotaxis, supercomputers, and humanoid robots, a number of commentators think Tesla shareholders should be more worried about Elon Musk. Are they right?
Tesla’s business
To date, Tesla has achieved a lot. It’s the world’s largest manufacturer of electric vehicles and it seems to be making the most progress of anyone with driverless vehicle systems.
Price reductions in 2023 are weighing on short-term margins. But an industry-wide slowdown has forced its rivals into retreat on autonomous driving projects, putting the company further in the lead.
The share price still reflects a degree of risky optimism about whether robotaxis will become a reality, when this will happen, and what the industry will be worth. But Tesla is clearly in pole position at the moment.
Elon Musk
It often goes unnoticed that Elon Musk doesn’t take a salary out of the business. Instead, the CEO relies on personal loans and uses his equity in the business as collateral.
Some of this was used in Musk’s takeover of X — formerly Twitter — last year. That means Tesla shareholders should be interested in what’s going on at X (and by all accounts, they’re going badly).
Last month, Musk decided to antagonise advertisers who were already boycotting the platform. This seems likely to create further trouble for a business that is burning through cash and has significant debt.
So what?
Does this matter for Tesla shareholders? After all, as Musk himself points out (rightly, I think) it doesn’t matter what people think of him, the company’s success depends on the quality of the cars it produces.
The issue is a bit more complicated than this, though. There are a couple of ways in which X’s financial troubles might generate downward pressure on the car company’s share price.
If X defaults on its loans, its lenders can sell the Tesla shares held as collateral. But the most obvious way for X to stay solvent is for Musk to restore the balance sheet… by selling his own shares.
A buying opportunity?
Either way, an unscheduled sale is likely to affect the supply and demand balance in the stock market, causing the price to fall. And I think this could be the biggest threat to the Tesla share price in 2024.
The near future doesn’t look like a great economic environment for car manufacturers. But Tesla has demonstrated this year that its share price can not only survive but thrive in these kinds of conditions.
A forced sale wouldn’t change the underlying fundamentals of the business, though. So if the stock does fall, it could be worth watching out for a buying opportunity in a company that looks expensive at the moment.
