Hedge funds took a gamble on short bets against Tesla Inc., only to be caught off guard by the electric vehicle maker’s impressive second-quarter delivery figures. The move, which saw over 18% of hedge funds holding a short position on Tesla at the end of June, has now backfired as Tesla’s share price soared by 40% since the beginning of June.
Analysts are optimistic about Tesla’s future, with Morningstar Inc.’s Seth Goldstein predicting improved profit margins and a return to profit growth next year. However, uncertainties loom over the wider electric vehicle market, with conflicting dynamics such as tariff wars and consumer skepticism posing challenges.
The industry’s future is further clouded by political factors, with US President Donald Trump threatening to undo laws supporting battery-powered vehicles if re-elected. Despite this, Trump has expressed admiration for Tesla’s Cybertruck, highlighting the complex relationship between politics and the EV market.
Internal disruptions at Tesla, including job cuts and production delays, have added to the uncertainty surrounding the company. Some hedge fund managers, like Fabio Pecce of Ambienta, have opted to steer clear of Tesla altogether due to concerns about corporate governance and management.
As investors navigate the volatile EV market, some are shying away from green stocks and EVs in general. The Bloomberg Electric Vehicles Price Return Index has seen a 22% decline in 2024, reflecting the challenges faced by the industry as a whole.
While some investors see potential for further bankruptcies in the EV space, others believe that the market may have already reached a turning point. With valuations in the EV sector at rock bottom, the future remains uncertain for both established players and startups in the industry.
