Tesla Inc shares are experiencing a significant decline. The electric vehicle market appears to be weakening, and there are growing concerns about the company’s core automotive business.
Key Points to Consider
- Tesla stock is showing notable weakness
- The electric vehicle market is experiencing a decline in demand
- The company’s core automotive business is under pressure
EV Demand Continues to Slide
The demand for electric vehicles in the US plunged 30% year-over-year in January, accounting for just 6% of all new car sales. The loss of the $7,500 federal tax credit at the end of September has significantly dampened demand. As a result, automakers have responded by cutting prices, with average EV selling prices falling 3% year-over-year in December. This trend is expected to continue, which could squeeze Tesla’s margins.
The Cash Flow Concern
Investors are paying close attention to Tesla’s core car business, which is the company’s main source of revenue. Tesla plans to spend around $20 billion on new equipment this year to support its ambitions in robo-taxis and robotics, roughly double its typical annual spending. This increase in spending comes at a time when Tesla’s automotive business is already under pressure, raising doubts about whether the company can generate enough cash to support its AI-driven ambitions without a rebound in vehicle sales.
Technical Picture Shows Weakness
Tesla is currently positioned below its key moving averages, indicating a bearish sentiment in the market. The stock is trading 5.9% below its 20-day SMA and 10.3% below its 50-day SMA, suggesting potential weakness. The RSI is currently at 42.84, which is considered neutral territory, indicating that Tesla is neither overbought nor oversold.
Key Technical Indicators
- 20-day SMA: $417.41
- 50-day SMA: $439.21
- RSI: 42.84
- MACD: above its signal line, indicating bullish momentum in the short-term
- Key support: $387.50
- Resistance: $436.50
Outlook
Over the past 12 months, Tesla has gained 19.59%, reflecting a positive longer-term trend despite recent volatility. The stock is currently trading at 63.7% of its 52-week range, which shows it is closer to its highs than its lows. This positioning suggests that there may still be room for growth if the stock can regain momentum and break through resistance levels.
Current Price Action
Tesla shares were down 3.78% at $395.88 at the time of publication on Monday. Investors should remain cautious and monitor the stock’s movement closely, as it may signal a potential reversal or continuation of the current trend.