If the stock price is anything to go by, Tesla is in trouble. The electric vehicle (EV) company’s market cap has down 73% from the all-time high in November 2021which worries investors.

At first glance there is no crisis. The cars are still the benchmark for performance. The underlying technology and the sophistication of the software remain leading. The supercharger network of fast EV charging stations is the envy of competitors. The advanced assembly plant and mega factories (for large-scale production of EV batteries) peak productivity support.

Tesla’s direct-to-customer sales model has also enabled rapid market penetration and has been resilient under pandemic conditions. It continues to deliver enormous savings on fixed costs. The Model 3 – which is assembled in China, where costs are low, and presented as the brand’s first large-scale electric car – has been successful. Tesla’s new factory in Germany, where its Model Y is made, was production of 3,000 cars per week by the end of 2022.

Congratulations to the Giga Berlin team for building 3k Model Y this week! pic.twitter.com/uUTOTRrasX

—Tesla (@Tesla) December 18, 2022

And after that reports profit for the first time in 2020 – after years of losses in a sprint to growth – in the 12 months to September 2022 Tesla the profit was US$11.19 billion (£9.8 billion). This was more than double the previous 12 months. So why the concern?

Tesla’s position as a market leader is threatened by increasing competition in electric car production rumors are starting to circulate that investors may be concerned about Musk’s ability to successfully run both the auto company and Twitter. He bought the social media platform last October after difficult negotiations with the board. He has since proposed he will step down as CEO of Twitter but has yet to announce a timeline for that. Meanwhile, Tesla clearly needs more attention than it currently gets.

Traditional vehicle manufacturers and newcomers are entering the EV market, encouraged by government mandates to end sales of gasoline and diesel cars. Tesla’s technological lead is being eroded, putting pressure on the brand’s premium positioning. Tesla got lucky with that supply constraints, especially in semiconductors, have so far reduced this pressure. However, as those supply constraints ease, the pressure on Tesla will increase.

Tesla has also endured its own setbacks. Musk has succeeded in converting the company to true mass production, but he famously described the company’s new factories in Germany and Texas as “gigantic money furnaces”.

Musk has said he wants Tesla to produce 20 million vehicles annually by 2030, but this is hugely ambitious. The automaker has recently experienced production delayssupply shortages, controversies over his claims about the safety and development of his self-driving and Autopilot systemand vehicle recalls regarding a software issue that “on rare occasions” affects vehicles’ rear lights. The company has also suffered from turbulent COVID-related conditions in China – a major parts supplier – and 2023 is likely to remain challenging for many in the global auto industry as the major economies slow down.

What could help Tesla now is to be run more like a traditional car company.

Back to basic

Production must be ramped up quickly to meet Musk’s delivery promises, but without compromising on quality. The next challenge will be to expand the brand into smaller vehicle types than the Model 3, while retaining the cachet that enables premium pricing.

Of nearly 100,000 employees worldwide, Tesla will also have to be more cost-conscious. This is especially true because input prices for material and components are rising rapidly.

Tesla also needs to do more to extract value from cars that are already in use. The company is known for owns a large part of the inbound supply chain for its batteries and their materials, but it has been slow to identify the earning opportunities of the entire lifecycle of its cars. Competitors incl VW group and Renault in Europe and NI in China pioneering new lifecycle business models that capture value for manufacturers from the sale, use, second use and final recycling of vehicles. This makes Tesla’s “sales only” approach old-fashioned.

Tesla’s falling share price

However, investor sentiment is clearly key when it comes to Tesla’s falling share price. The company could do this by being more careful when announcing forecasts for production, sales, new models and technology breakthroughs to avoid surprising or disappointing investors.

With this in mind, it’s not surprising that for investors, the biggest problem to solve at Tesla is Musk’s role. There are two questions: is Musk sufficiently involved in Tesla’s future and can Tesla continue to thrive through cooperation with Musk?

In Tesla’s last tranche of stock sales in December 2022, Musk cut his stake in the company to 13.4%, although he remains the largest shareholder. Some observers associated with this sale to the need to fund other business interests, especially Twitter.

The risk is that Musk becomes more of a liability than an asset to the company. While he also runs Twitter, Musk may not be able to give Tesla the attention it needs as it grows and competition intensifies. But Musk’s quirky personality, and especially the management style he displayed while running Twitter, could damage the Tesla brand and upset Tesla employees and investors.

The characteristics that have made Musk such a successful disruptor may not be well suited to a mature and institutionalized multinational corporation. Musk and Tesla have long seemed synonymous. It seems the time has come for that to end.

• Peter Wellsprofessor of Business and Sustainability, University of Cardiff

This article has been republished from The conversation under a Creative Commons license. Read the original article.