 Hello, Andrew here. Welcome to my channel. Today I will talk about various near-term risks for Tesla stock. Tesla was hovering around $180 recently, but it can go lower from here based on negative sentiment that is building up. In my previous video I talked about tailwinds that can propel Tesla higher, but short-term there are many negatives that can weigh on the stock and that is the focus of today's video. Let's start with one major risk for Tesla, which is the EV sales slowdown worldwide. The EV market is still showing healthy growth, but the growth rate itself is falling. For instance, here's a chart for both battery EVs and plug-in hybrid EVs. Based on IEA estimates, the growth rate in 2023 was around 34%. More updated figures show growth in 2023 at 31%. Before, growth rates were 50 to 60%. But here's a problem for Tesla that we can see from this graph. China accounted for almost 60% of all EV sales worldwide. Yes, Tesla has a production footprint in China, but the competition there is very stiff. Among Tesla's competitors are Car Giant, BYD, GAC, AON and SAICGM, Wuling Automobile. And that is just to name a few. You may retort, well, Tesla may have a superior technology compared to these Chinese automakers, but I won't be so quick. Actually, these Chinese automakers produce quite competitive vehicles, and especially those by BYD. BYD has both affordable and luxury cars. And this is where the problem lies. Tesla does not have inexpensive cars on sale. Conversely, Chinese automakers, especially BYD, have inexpensive cars such as the Siegel model comes out at $11,000. Of course, the specs and driving range can be not so great, but it doesn't really matter, especially in developing countries, where customers are very price-sensitive and would care a lot about the price. Unfortunately for Tesla, they won't have this inexpensive car that they will sell for around $25,000, which is the crossover that they promised. It won't be available until 2025 or even maybe 2026 if Elon Musk proves wrong with his timeline. The other problem is with subsidies in China. China used to have a 10% tax exemption on purchases of EV cars up until 2022. They extended this program again in 2023 with subsidies that amount to up to $30,000 yuan or $4,170. But these subsidies will get phased out in 2026 and 2027. Basically, the government in China is signaling that they want to reduce the support for EVs going forward. And unless these tax subsidy programs are renewed, the EV car makers in China will be left to fend for themselves. Moreover, EV car makers in China are waging price wars. For instance, Tesla lowered its prices from 6% to 11% depending on the model at the end of 2023. Ironically, certain Tesla car models cost less now in China compared to the US, sometimes by 20% or even more. And Chinese car makers followed Tesla's suits and lowered prices too. And this doesn't bode well for Tesla's margins. To underscore how important China's EV market is to Tesla, consider the recent news from a week ago. According to official stats, Tesla's deliveries in China plunged in February 2023. They were down 19% year over year and down 16% compared to January. The stock promptly dropped by 7% on that day and even lower afterwards on other negative news. So this development is bad for Tesla's margins and sales. To give you a perspective, Tesla generated 22.4% of its revenues in China in 2023. And of course, there are problems in Tesla's domestic market. After showing massive growth of 69% in 2022, Tesla's sales in the US slowed to 11.5% growth rate. There are many problems for EV adoption in the United States. These include slow charging times and scarce charging network. Overall, the US auto market slowed down after the pandemic. Of course, this is the aggregate figure. Tesla saw record sales numbers in 2022 despite lower aggregate sales. And yet, the challenge now is to convince middle income or lower income households to buy into EV cars. And that remains a tough sell. EV cars, they still cost more compared to gas prices. So even though they promise the EV cars, they promise lower maintenance, the jury on that is still out. And for now, most people care about their initial price and they focus on that and that plays against EV cars. Also, there is a negative perception that the EV cars, they are not reliable under the extreme weather conditions, which is rightly so. Also charging is another issue that I mentioned before and it will get solved with charging stations built around the country. But it will take time and lots of money. And finally, interest rate has gone up. And many people, they still buy their cars based on how much they have to pay for the monthly car loan payments. And that doesn't help either. On top of slowing EV demand, Tesla is also facing fierce competition, especially from the Chinese automakers, such as BYD, which is taking the world of EVs by storm. My previous video profiled BYD and compared it to Tesla. There I make it clear that Tesla needs to speed up its plans for its inexpensive model. Otherwise, it will have a very big problem with BYDs selling its inexpensive cars in developing countries and saturating markets there. For now, BYD is not selling its cars in the US, but it has plans to open a factory in Mexico, which could serve as a backdoor entry into the US market. And unless US government does something about this again, this could be a game over for many US car makers, specializing in EV production. Tesla will likely take a hit and survive. But still, this is a looming problem out there. The other issue that is less evident is unions. Tesla, despite its high levels of automation, still relies on about 140,000 people in its factories. And roughly about 50% of those, which is 70,000, work in US factories. Of course, Tesla successfully kept unions at bay at its factories. As you may know, many car makers in the US experienced disruptions due to strikes from United Aura workers in 2023. And these strikes, they produced major concessions, such as 25% wage bump, as well as profit sharing. But most importantly, this produced ripple effects across non-union factories. Tesla had to increase wages by 10% at its US factories. And likely more wage increases are coming to avoid unionization. So, this may not seem much. But if unionization attempt succeeds, Tesla may be up for a wild ride with UAW. Strikes and other demands may turn into avalanche that may make Tesla less flexible. If Tesla continues its automation march, which it will, UAW may make even more aggressive demands such as job guarantees and protection against layoffs and planned closures. Also, the risk of unionization may go up in other countries. For instance, Tesla is tied in a dispute with Swedish Mechanics Union. And unions in other Nordic countries joined this strike in solidarity. For instance, Danish dock workers are refusing and basically stopped transporting or uploading Tesla's cars there. Nordic countries are different compared to the US. And I think this is what led to this misunderstanding and conflict. Nordic countries don't have that many labor laws, things like minimum wages or other aspects of the workplace regulation. And many of these things and these issues are taken care of during the collective bargaining between unions and firms. So, I think Nordic unions have a lot at stake here and they won't let Tesla off the hook very easily. The other risk for Tesla is that many of its moonshots will not materialize or flow. The upside from the $200 market price highly depends on the software margins in the realm of 20-30%. And if for any reason this doesn't happen or gets delayed, the market repricing is inevitable. For instance, Tesla's dojo supercomputer project will require up to $1 billion in investments during 2023 and 2024. That's a lot of money that will be burned with uncertain payoff. So, this may or may not work out. There was a departure in 2023 of Ganesh Venkataramanan. He was the lead person on the dojo supercomputer project. Likewise, Tesla lost Andrey Karpathy in 2022. According to Elon Musk, he wrote single-handedly the code for the full self-driving software. So, these departures underscore the problems and risks for these moonshots. Finally, Elon Musk remains the biggest risk for Tesla. There are many people who are huge fans of Tesla and Elon Musk and they were early adopters of its products such as cars or powerwall. But I think Tesla is hitting a wall with middle-income consumers. In other words, there are just so many wealthy customers that you can sell these cars at $50,000 or $100,000. At some point, an affordable vehicle is a must to appeal to a broader audience, but here Tesla and Elon Musk must strad very carefully. Not only they have to speed up their plans for this affordable vehicle, Elon Musk must be very careful not to alienate future buyers with his divisive language that he is notorious for. And finally, we do not know to what extent Tesla's value depends on Elon Musk today. Meaning, what if Elon Musk departs for one or the other reason? I mean, after all, he doesn't have a controlling stake in the company and this is quite conceivable. I also hope that he takes his health seriously. Elon Musk probably has a lot of involvement in engineering and manufacturing efforts at Tesla. So, to me, it's a big concern when a large chunk of stock's value is tied to one thing, be it a large customer, one supplier or one key person in case of Tesla. So, if negative news keep piling up in 2024, it's quite possible that Tesla stock may stumble and tumble again. So, this is something to keep in mind if you're thinking of investing in Tesla today. That is it for this video. I hope you learned something new today. If you did, give this video a like and subscribe to my channel for more content on investing. Thank you for watching.