Tesla stock: A look at a very bad 2022 for Elon Musk’s EV company

After a tumultuous year in which its CEO, Elon Musk, acquired Twitter, electric vehicle company Tesla (TSLA) is looking forward to the end of 2022.

The stock has had its worst annual performance this year, shedding nearly 70% of its value. Analysts on Wall Street have attributed much of the downfall to Musk's volatile behavior.

Here is a look at the rocky year for Tesla.

A promising start to the year

Throughout the pandemic, Tesla shares boomed.

In February 2020, Tesla traded at $60 per share. On the first trading day of 2022, it had soared to nearly $400 per share, though the stock subsequently fell under pressure.

Overall, the first quarter in 2022 was profitable for Tesla. Its operating margin was at a record high of 19%, and the company delivered over 300,000 cars. When inflation and global supply chain concerns started catching up with the company, Tesla responded with multiple price hikes for its products, and the stock rebounded.

More relief from the bear market came in late March, when Tesla unveiled a new gigafactory in Berlin, Germany. It brought hope at a time when China, the world's largest EV market, started seeing a resurgence in COVID cases, and the stock jumped to $381 on April 4.

Also in April, Musk made a bid to buy social media platform Twitter for $54.20 a share. Tesla's stock would soon suffer.

Developments in China and the Twitter saga

With nearly 8% of EV market share in the country, Tesla revamped China's electric car market with its largest gigafactory in Shanghai, which has produced over a million cars since opening in 2019.

Sales in China have amounted to about a quarter of global Tesla sales (about $14 billion in 2021).

China has one of the lowest direct investment openness levels in the world, according to the Atlantic Council and Statista. It has always required foreign companies to become partners with domestic Chinese companies to operate in China.

But in 2018, Tesla became the exception. Musk reached a deal with local authorities for the company to solely own the Shanghai gigafactory with a 10% corporate income tax cut, according to Tesla's SEC filings.

Tesla's footprint in China aided Musk in becoming at one point the richest person in the world (a title he relinquished late this year). But COVID soon got in the way. Shanghai went under lockdown, halting EV production. In April alone, Tesla's China production was down nearly 80%.

Meanwhile, Musk — a market mover in the crypto world — disclosed that Tesla held $2 billion in bitcoin, which Wedbush analyst Dan Ives called a "distraction and sideshow" in an interview with Yahoo Finance.

Musk's "distractions" multiplied. He needed money to become the owner of Twitter and began selling Tesla stock in April. He sold $8.4 billion worth of stock in less than a week followed by another $4.4 billion two days later. Tesla investors were disappointed that the stock was being used to fund Musk's purchase, which further tanked shares.

After the sales were publicized, Musk tweeted: “No further TSLA sales planned after today.”

The second quarter was even more detrimental for Tesla stock. On May 24, the stock hit its lowest level for the quarter at $209 per share.

The tough quarter brought Tesla's public image under scrutiny, and uncertainty with the stock grew further. In June, mass layoffs in Nevada resulted in a lawsuit against the company for violating federal law by not providing advance notice of job cuts.

Meanwhile, Musk kept selling assets. He sold 75% of Tesla's bitcoin by July for regular cash, which at the time of purchase Musk had declared he would not sell.

The stock again went into an unstable zone. When Musk called to scrap the Twitter deal, Twitter sued, and Musk ultimately ended up following through on his purchase. Still, long-term relief for Tesla was not in sight.

The final showdown

By late July, Tesla stock seemed to be recovering.

With Shanghai reopening, expectations for annual sales reached 6 million, higher than previous estimates, as Hertz (HTZ) CEO told Yahoo Finance that demand for rentals was "very, very solid."

But supply was not at par, and production disruptions had become the norm for Tesla. In July, sales declined in China due to factory closure once again, this time for an upgrade to factory lines.

Then, Musk sold 7.29 million Tesla shares, helping send the stock 2% lower that day.

In an effort to stabilize the stock in the long term, Tesla's board of directors wanted to conduct a 3:1 stock split, which would increase the number of shares, generate interest from retail investors, and make the stock more affordable for average investors. Although stock splits don't affect a company's market value, they can boost stock prices as more shares are bought; however, that did not happen in Tesla's case.

October brought more COVID outbreaks, and China locked down once again. In the same month, Tesla missed Q3 earnings, though Musk stated that the company had "excellent demand for Q4."

"The factories are running at full speed, and we’re delivering every car we make and keeping operating margins strong," Musk said on Tesla's earnings call.

He also closed the Twitter deal at the original $44 billion price, which set off a series of layoffs, lawsuits, and numerous antics that have changed the structure of Twitter. Some analysts contended that Musk had become "fairly distracted" by Twitter, adding to Tesla's chaotic year.

“In what has been a dark comedy show with Twitter, Musk has essentially tarnished the Tesla story/stock and is starting to potentially impact the Tesla brand with this ongoing Twitter train wreck disaster,” Wedbush Senior Analyst Dan Ives wrote in a note in November.

Finally, December put Tesla in the eye of the storm. The gigafactory in Berlin descended into "total chaos" due to staffing issues. And while the U.S. EV market heavily favors Tesla — at about 65% market share, according to S&P Global Mobility data — the competition is gaining. In late November, S&P estimated that Tesla could slip to 20% market share by 2025.

Meanwhile, weekly turmoil at the new version of Twitter continued as Musk asked users whether he should step down as CEO.

And Tesla stock became increasingly volatile. Oppenheimer downgraded Tesla stock, and it reached a fresh low after dropping about 70% year to date. The stock continued tanking to its lowest price in years.

“Don’t be too bothered by stock market craziness," Musk told Tesla employees in an effort to increase morale. "As we demonstrate continued excellent performance, the market will recognize that."

Some Tesla bulls believe the stock could surge higher next year, even after it was one of the worst-performing stocks of 2022.

Yet critics believe Musk has damaged Tesla's brand image with his investment in Twitter and the outlook for Tesla in early 2023 doesn't seem much better.

The company announced a hiring freeze with layoffs in 2023's first quarter. The Shanghai plant faces questions about whether it will continue to be Tesla's production cornerstone, as it will not reopen in January for full-scale production.

As for selling stocks, Musk said with a recession "overdue," he won't sell any more Tesla shares for the next year and a half. But he has broken that promise before.

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Tanya is a data reporter for Yahoo Finance.

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