Tesla Faces Criticism Over Valuation and EV Market Competition

Tesla is facing intensified scrutiny regarding its market valuation and competitive position in the electric vehicle sector. Notable investor Michael Burry, famed for his role in The Big Short, recently declared that Tesla is 'ridiculously overvalued.' In his Substack column, Burry criticized Tesla for missing Elon Musk's ambitious targets for full self-driving technology.

He noted that the costs associated with improving this technology are escalating without significant revenue to offset them. Burry pointed out that Tesla's stock-based compensation practices dilute shareholder value, as the company dilutes its shares at a rate of 3.6% each year and does not offer stock buybacks, suggesting that its true earnings are not accurately reflected under Generally Accepted Accounting Principles.

He indicated that this deceptive accounting could lead to a lower valuation for Tesla than what many current investors believe. Meanwhile, Tesla's sales figures are also troubling, as recent data indicates a significant decline in sales.

For instance, the Tesla Model Y lost its title as the best-selling electric vehicle in October, falling to the Wuling Mini EV, which achieved over 61,000 registrations. Tesla's performance in the same month saw a decrease of 37% year-over-year, with only 53,320 units sold.

The Model 3 also struggled, coming in at 14th place among electric vehicles with nearly 20,000 units sold, marking its worst performance since July 2022. This downturn in sales is attributed to a so-called 'hangover' in the U.S. market, which was down nearly 50% year-over-year.

The global electric vehicle market, however, is still growing, with over 1.9 million plug-in vehicles registered in October, a 10% increase compared to the previous year. Despite this growth, Tesla's share of the EV market has dropped to 7.8%, a 2.7 percentage point decrease compared to the same month last year.

In contrast, competitors like BYD and Geely are gaining ground, with BYD maintaining a significant lead in the market. Analysts are now predicting that if current trends continue, Tesla could be overtaken by other manufacturers, including Geely and Volkswagen, in the coming years.

This evolving competitive landscape, combined with the critical commentary from investors like Burry, underscores the challenges Tesla faces as it navigates its market valuation and strives to regain its competitive edge in the electric vehicle arena.