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In October, Tesla shares dipped to their lowest in six months after an intense third-quarter earnings call where CEO Elon Musk revealed a significant decline in gross margins—from 25.1% to 17.9%. This drop, along with sluggish growth, delays in the Cybertruck launch that allowed competitors to gain an edge in the electric truck market, and lower expectations for future growth, has left investors uneasy. Among the top seven companies in the S&P 500—Amazon, Microsoft, Apple, Google, Facebook, Nvidia, and Tesla—Tesla reported the weakest 2023 figures.

For years, Tesla’s market valuation has far outstripped its earnings, with investors banking on its potential for exponential growth. Optimism about the company’s advanced driver-assistance systems, the long-promised $25,000 electric vehicle, and even its humanoid robot have bolstered its stock. However, Elon Musk’s reputation for overpromising and underdelivering is beginning to catch up with him, as some investors start to doubt whether these ambitious projects will ever materialize.

Tesla’s sales are being hit by rising interest rates, high inflation, and dwindling demand for electric cars. Even aggressive price cuts on its vehicles haven’t substantially increased demand. Analysts from Deutsche Bank noted that a second wave of EV buyers is waiting for more affordable prices and better charging infrastructure. It seems Tesla may have reached a temporary limit in its current market, leading to lower-than-expected projections for 2024.

Tesla’s price-to-earnings ratio now stands at almost twice that of Amazon and more than three times that of Facebook, raising questions about its high valuation. Its P/E ratio is about 72.65, while General Motors has a ratio of 4.2 and Ford 6.89, indicating that Tesla’s industry peers are valued much lower.

Despite these challenges, Musk envisions Tesla reaching a $4 trillion valuation, though he admits this would require repeated exceptional performance—an unlikely prospect.

Meanwhile, in Germany, several companies face bankruptcy this July, including BBS, Recaro, and Fanatec. The sim racing giant Fanatec has amassed significant debts totaling 95 million euros. It has entered restructuring with the help of strategic investment bridge financing from Corsair. The CEO and majority shareholder, who tried to avoid restructuring without a solid alternative, has been ousted. According to Endor AG, Corsair stopped payments because “the ongoing disruptions made a reorganization under [German law] impossible.”

Without the CEO’s support, Fanatec is expected to go bankrupt and be taken over by Corsair, likely at a discounted price. Corsair seems to be strategically planning to purchase the company out of receivership rather than continue financing its mounting debts.

During the pandemic, Endor incurred heavy debt to meet rising global demand. Like many companies that grew rapidly due to isolated consumers and the desire for escapism during COVID-19, Endor found itself overleveraged when demand decreased. The company owes 95 million euros, with annual sales of just 100 million euros.

Endor AG states that its business operations will continue during insolvency proceedings, with sales, warranties, and repair services remaining available, alongside driver and software updates. However, as a former Fanatec customer, I can attest that their service wasn’t the best even before the bankruptcy, so expect delays and frustration.