In a surprising twist of fate, Elon Musk, the well-known figure behind Tesla, has been surpassed as the world’s wealthiest individual. The coveted title now belongs to Bernard Arnault, the influential leader at the helm of the luxury goods empire, LVMH. This notable transfer of wealth follows a tumultuous January for Tesla, characterized by a staggering $200 billion decline in market value.
Elon Musk’s net worth, which reached a staggering $320 billion in November 2021, has now declined to an estimated $205 billion, as reported by Forbes. The decline in Tesla’s fortunes mirrors a string of setbacks encountered by the electric vehicle (EV) manufacturer throughout the month.
Tesla’s decline commenced when it relinquished its position as a market leader in the electric vehicle (EV) industry to China’s BYD in the fourth quarter. Subsequent revelations regarding underlying challenges in Europe’s automotive market, combined with concerns surrounding the reliability of EVs in adverse weather conditions, further diminished investor confidence in Tesla’s prospects.
Furthermore, the Wall Street Journal brought forward allegations concerning Musk’s purported substance abuse, which raised concerns about Tesla’s corporate governance. Additionally, Musk’s pursuit of an ambitious compensation package, tied to the company’s performance and his stake, further fueled the controversy, amplifying the scrutiny of Tesla’s management practices.
Tesla faced the peak of its troubles when it released its Q4 earnings report, leaving investors unconvinced due to a lack of definitive guidance on future growth. Despite an impressive revenue of $97 billion in 2023, diminishing profits and free cash flow raised doubts about Tesla’s long-term viability.
In the midst of this turmoil, Musk provided a ray of hope by announcing plans for a budget-friendly model priced at $25,000, set to be launched in the second half of the year. Nonetheless, doubts linger among investors, who question whether Tesla should be primarily valued as an AI company, as Musk suggests, or as a traditional car manufacturer with lower valuation multiples.
In striking contrast, LVMH, led by Bernard Arnault, has experienced a remarkable upswing in fortunes. Despite industry trends, the company reported robust Q4 sales that exceeded expectations. As a result, Arnault’s wealth soared to $208 billion, driven by a significant 12% increase in LVMH’s share price.
While Musk is still close in terms of wealth to Arnault, the future of Tesla’s valuation remains uncertain. If investors start perceiving Tesla as just another car manufacturer instead of a technology leader, Musk’s fortune could suffer further setbacks. The story of BYD serves as a cautionary tale, highlighting the inherent volatility in the electric vehicle market despite Musk’s positive outlook on its potential.
While investors eagerly anticipate Tesla’s annual filings for additional insights, the future course of Musk’s wealth depends heavily on how the market perceives Tesla’s fundamental identity and growth prospects.