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Automotive stocks plunge going into October

Credit: Carlos Delgado; CC-BY-SA"

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As inflation and supply chain issues continue to rattle the world economy, automotive stocks have plunged going into October.

Despite numerous brands expected to deliver record numbers of vehicles and some reporting successful Q3 production and delivery numbers, automotive stocks have plunged as global issues continue to hamper automotive stocks in particular. Tesla, in particular, is down in pre-market trading by nearly 5%.

Over the past five days, numerous big names in automotive stocks have taken hits in share prices. Tesla (NASDAQ: TSLA) is down 4.4% in pre-market and down 2.4% over the past five days, Ford (NYSE: F) down 8.2%, GM (NYSE: GM) down 8.5%, Stelantis (NYSE: STLA) down 3.6%, Volkswagen Group (OTCMKTS: VWAPY) down 8.7%, Toyota (NYSE: TM) down 4.2%, and even Porsche (XETRA: P911) has dipped below their IPO price only days after release.

Reuters chalks up the downturn to inflationary pressure more than supply chain issues. Specifically, they site an announcement from used car seller CarMax, saying that customers are decreasing spending on large purchases, including vehicles. TrueCar analysts told Reuters that automakers might need to lower pricing and/or lengthen financing terms to incentivize customers to purchase vehicles in this inflationary time.

Porsche’s IPO is a surprise considering the stock only became available recently and quickly became the most valuable IPO in over a decade. It should be noted that the new public brand has faired particularly well compared to older stocks, only down 1.5% over the past five days.

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With the expected release of Q3 earnings, production numbers, and more expected in the coming week/s, it remains unclear how investors will react to the news. While many online personalities have rejoiced at the news of Tesla’s continued production growth in Q3, the stock followed the industry trend and lost significant value. The same could happen to other brands.

Inflationary issues are ironic as the US dollar has become stronger than ever as the Pound, Euro, Yen, and many others have fallen in value. This could mean that many US automakers will face issues selling abroad as their products are more expensive due to currency conversions.

All of this is to say is that, while automotive stocks were able to weather the COVID storm better than most, they are now facing a new set of challenges that are making future predictions next to impossible. The future, in short, remains unclear.

William is an owner of Ford and Tesla Stock and numerous ETFs and index funds, including many of the stocks listed above.

What do you think of the article? Do you have any comments, questions, or concerns? Shoot me an email at william@teslarati.com. You can also reach me on Twitter @WilliamWritin. If you have news tips, email us at tips@teslarati.com!

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Will is an auto enthusiast, a gear head, and an EV enthusiast above all. From racing, to industry data, to the most advanced EV tech on earth, he now covers it at Teslarati.

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Investor's Corner

Tesla bear turns bullish for two reasons as stock continues boost

“I think from a trading perspective, it looks very interesting,” Nathan said, citing numerous signs of strength, such as holding its 200-day moving average and holding against its resistance level.

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Credit: Tesla Manufacturing

A Tesla bear is changing his tune, turning bullish for two reasons as the company’s stock has continued to get a boost over the past month.

Dan Nathan, a notorious skeptic of Tesla shares, said he is changing his tune, at least in the short term, on the company’s stock because of “technicals and sentiment,” believing the company is on track for a strong Q3, but also an investment story that will slowly veer away from its automotive business.

“I think from a trading perspective, it looks very interesting,” Nathan said, citing numerous signs of strength, such as holding its 200-day moving average and holding against its resistance level.

He also said he believes a rally for the stock could continue as it heads into the end of the quarter, especially as the $7,500 electric vehicle tax credit is coming to an end at the end of the month.

With that being said, he believes the consensus for Q3 deliveries is “probably low,” as he believes Wall Street is likely underestimating what Tesla will bring to the table on October 1 or 2 when it reports numbers for the quarter.

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Tesla shares are already up over five percent today, with gains exceeding nine percent over the past five trading days, and more than fourteen percent in the past month.

While some analysts are looking at the performance of other Mag 7 stocks, movement on rates from the Federal Reserve, and other broader market factors as reasoning for Tesla’s strong performance, it appears some movement could be related to the company’s recent developments instead.

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Over the past week, Tesla has made some strides in its Robotaxi program, including a new license to test the platform in the State of Nevada, which we reported on.

Tesla lands regulatory green light for Robotaxi testing in new state

Additionally, the company is riding the tails of the end of the EV tax credit, as inventory, both new and used, is running extremely low, generally speaking. Many markets do not have any vehicles to purchase as of right now, making delivery by September 30 extremely difficult.

However, there has been some adjustments to the guidelines by the IRS, which can be read here:

Tesla set to win big after IRS adjusts EV tax credit rules

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Tesla is trading at around $389 at 10:56 a.m. on the East Coast.

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Elon Musk

Analyst: Elon Musk’s $1 trillion Tesla pay deal modest against robot market potential

Jonas highlighted Tesla’s longer-term ambitions in robotics as a key factor in his assessment.

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Credit: Tesla

Morgan Stanley analyst Adam Jonas, one of Wall Street’s most ardent Tesla (NASDAQ:TSLA) bulls today, has described Elon Musk’s newly proposed $1 trillion performance-based compensation package as a “good deal” for investors. 

In a note shared this week, Jonas argued that the package helps align the interests of Musk and Tesla’s minority shareholders, despite its shockingly high headline number.

Future market opportunities

Jonas highlighted Tesla’s longer-term ambitions in robotics as a key factor in his assessment. “Yes, a trillion bucks is a big number, but (it) is rather modest compared to the size of the market opportunity,” Jonas wrote. He added that the humanoid robot market could ultimately surpass the size of today’s global labor market “by a significant multiple.”

“We have entertained scenarios where the humanoid robot market can exceed the size of today’s global labor market… by a significant multiple,” Jonas wrote, as shared on X by Tesla watcher Sawyer Merritt.

The analyst likened the arrival of AI-powered robotics to the transformative effect of electricity, noting that “contemplating future global GDP before AI robots is like contemplating global GDP before electricity.” The Morgan Stanley analyst’s insights align with the idea that as much as 80% of Tesla’s future valuation could be tied to its Optimus humanoid robot program.

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Elon Musk’s pay package

Tesla’s board has tied Elon Musk’s proposed compensation package to some of the most ambitious targets in corporate history. The 2025 CEO Performance Award requires the automaker’s valuation to soar from roughly $1.1 trillion today to $8.5 trillion over the next decade, a level that would make Tesla the most valuable company in existence.

The plan also demands a leap in Tesla’s operating profit, from $17 billion in 2024 to $400 billion annually. It also ties the CEO’s compensation to a number of product milestones, including the delivery of 20 million vehicles in total, 10 million active Full Self-Driving subscriptions, 1 million Tesla Bots, and 1 million Robotaxis in operation. Tesla’s board emphasized that Musk’s leadership was fundamental to achieving such ambitious goals, with Chair Robyn Denholm noting the award would align the CEO’s incentives with long-term shareholder value.

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Elon Musk

Tesla board reveals reasoning for CEO Elon Musk’s new $1 trillion pay package

“Yes, you read that correctly: in 2018, Elon had to grow Tesla by billions; in 2025, he has to grow Tesla by trillions — to be exact, he must create nearly $7.5 trillion in value for shareholders for him to receive the full award.”

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tesla
(Credit: Tesla)

Tesla’s Board of Directors has proposed a new pay package for company CEO Elon Musk that would result in $1 trillion in stock offerings if he is able to meet several lofty performance targets.

Musk, who has not been meaningfully compensated since 2017, completed his last pay package by delivering billions in shareholder value through a variety of performance-based “tranches,” which were met and resulted in the award of billions in stock.

Elon Musk’s new pay plan ties trillionaire status to Tesla’s $8.5 trillion valuation

However, Musk was unable to claim this award due to a ruling by the Delaware Chancery Court, which deemed the payout an “unfathomable sum.”

Now, the company is taking steps to ensure Musk gets paid, as the Board feels that it is crucial to retain its CEO, who has been responsible for much of the company’s success.

This is not a statement to undermine the work of all of Tesla’s terrific employees, but a ship needs to be captained by someone, and Musk has proven he is the right person for the job.

The Board also believes that, based on a statement made by the company in its proxy, various issues will be discussed during the upcoming Shareholder Meeting.

Robyn Denholm and Kathleen Wilson-Thompson recognized Musk’s contributions in a statement, which encouraged shareholders to vote to approve the payout:

“We’re asking you to approve the 2025 CEO Performance Award. In designing the new performance award, we explored numerous alternatives. Ultimately, the new award aims to build upon the success of the 2018 CEO Performance Award framework, which ensure that Elon was only paid for the performance delivered and incentivized to guide Tesla through a period of meteoric growth. The 2025 CEO Performance Award similarly challegnes Elon to again meet a series of even more aspirational goals, including operational milestones focused on reaching Adjusted EBITDA targets (thresholds that are up to 28 times higher than the 2108 CEO Performance Award’s top Adjusted EBITDA milestone) and rolling out new or expanded product offerings (including 1 million Robotaxis in commercial operation and delivery of 1 million AI Bots), all while growing the company’s market capitalization by trillions of dollars.

Yes, you read that correctly: in 2018, Elon had to grow Tesla by billions; in 2025, he has to grow Tesla by trillions — to be exact, he must create nearly $7.5 trillion in value for shareholders for him to receive the full award.

In addition to these unprecedented performance milestones, the 2025 CEO Performance Award also includes innovative structural features, born out of the special committee’s considered analysis and extensive shareholder feedback. These features include supercharged retention (at least seven and a half years and up to 10 years to vest in the full award), structural protections to minimize stock price volatility due to administration of this award and, thereafter, incentives for Elon to participate in the Board’s continued development of a framework for long-term CEO Succession. If Elon achieves all the performance milestones under this principle-based 2025 CEO Performance Award, his leadership will propel Tesla to become the most valuable company in history.”

Musk will have a lot of things to accomplish to receive the 423,743,904 shares, which are divided into 12 tranches.

However, the Board feels he is the right person for the job, and they want him to remain the CEO. This package should ensure that he stays with Tesla, as long as shareholders feel the same way.

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