Is Tesla finally in real financial trouble?

2023 was a high point of sorts for Tesla Inc. Just two years after becoming the first trillion-dollar automaker in history, the crown jewel of billionaire Elon Musk's tech empire saw its Model Y line supplant Toyota's RAV4s and Corollas as the best selling cars on Earth. That Tesla has become a juggernaut in not only the electric vehicle field but the automotive industry at-large in less than two decades after its first car rolled off the assembly line is undeniable. 

Similarly undeniable, though, are the struggles Tesla has faced recently. Increased competition in the market coupled with recalls, rollout challenges and a renewed focus on CEO Musk's personal and political output have contributed to a newfound sense that a brand once virtually synonymous with electric vehicles may not have the horsepower it once enjoyed. Tesla stock last week tumbled after the company's second-quarter profit dropped more than 40% from the previous year. The drop is a "stark contrast for a company that grew to become the world's most valuable automaker on surging sales and profitability," CNN said. 

While peaks and valleys are common for any company — particularly one in a still-relatively-cutting-edge field like Tesla — observers and analysts are split on whether the automaker now faces serious financial threats after dominating its field for so long. 

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'Only a short-term issue'

"Bullish" analysts are "optimistic about future efforts such as Tesla's planned autonomous 'robotaxis' and updates to its self-driving software," Investopedia said. "Sequential fluctuations in automotive gross margin hardly warrant mention, in the context of Tesla's wider ambition" of artificial intelligence products and autonomous commercial vehicles, analyst Alexander Potter of investment bankers Piper Sandler said to Marketwatch.

Already, those "wider" ambitions meant that "not all Tesla's news was bad," The Motley Fool stock analyst Rich Smith said. The company's "energy generation (i.e., solar panels) and storage (i.e., batteries) division — which believe it or not is now more profitable (with an 18.9% gross profit margin) than the automotive business, doubled in size to $1.5 billion in sales," Smith said. 

In part, Tesla's struggles represent the natural crowding of a field in which the company was, at one time, the sole major player. To that end, Musk himself "disparaged the quality of EVs from other automakers now in the market" to Tesla investors after last week's disappointing earnings statement, CNN said. Ultimately, Musk expressed that the market crowding "posed only a short-term issue for Tesla, not a long-term issue."

Tesla "remains very well positioned longer term" said Stifel analyst Stephen Gengaro to Market Insider. The company's robotaxi projects and fully autonomous driving vehicles mean it is teed up for "robust multi-year growth" for the next several years. 

'Investors are right to be confused. And nervous.'

This was Tesla's "second straight quarter of year-over-year sales declines for the company" and its "first-ever consecutive quarters of declining sales volume," CNN said. The only precedent for this type of decline for Tesla "came early in the pandemic, when stay-at-home orders forced its factories to close."

Musk "stammered throughout the Tesla earnings conference call" last week and said he would be "shocked" if full, unsupervised full-self driving did not happen this year, Investor's Business Daily said. "The Tesla CEO has said for almost a decade that full autonomy would likely happen 'this year.'" Musk's robotaxi initiative "relies on self-driving technology Musk has long promised but repeatedly failed to deliver," said Motortrend this past spring. Previous successes notwithstanding, Tesla's road ahead "looks littered with potholes" to the point where "investors are right to be confused. And nervous." Factors like Tesla's susceptibility to "fluctuating" demand for EVs at large and China's aggressive ascendency in the global car market means the company might be in "real danger of slipping from top dog to scrappy underdog."

For as much as there is much "talk about robotaxis, humanoid robots and autonomous driving" — all things which provide "an exciting narrative for investors,— the fact remains that "these are tomorrow's potential riches," AJ Bell analyst Dan Coatsworth said to Reuters. "Not today's."