Tesla Had a Bad Year. Some Investors Are Blaming Elon Musk.

In a down year for stocks, the 65 percent drop in Tesla’s share price stands out for the scale of wealth vaporized and the unorthodox behavior of its chief executive, Elon Musk.

The collapse of Tesla’s stock price destroyed about $672 billion in market value. And Mr. Musk, once hailed as a genius who remade the car industry, appears increasingly distracted by his acquisition of Twitter and is using the social network to vent his frustrations. He insulted one of his critics this week by describing him as having “tiny testicles.”

The spectacle has stunned investors and analysts. And many are asking what will happen to the stock, the company and Mr. Musk in 2023. The answer largely depends on Mr. Musk and Tesla’s board of directors.

Will he return his attention to Tesla and its myriad challenges? Or will he remain camped out at Twitter? Will Mr. Musk sell more Tesla shares to keep Twitter going after spending $44 billion to buy that company, despite promising not to? Will the Cybertruck, Tesla’s first new passenger vehicle in three years, finally be available for sale? And, perhaps most important, will Tesla’s board do anything to rein in Mr. Musk?

In a deteriorating economy, these uncertainties have forced investors to fundamentally re-evaluate Tesla’s prospects. It remains the most valuable car company and the only major automaker regarded as a growth stock. But investors are no longer convinced that Tesla can dominate the auto industry the way that Apple dominates smartphones or Amazon rules online retailing.

“The promise of Tesla was that at some point all of the cars in the world would be electric vehicles, and Tesla would play a major role in that,” said Efraim Benmelech, a professor of finance at the Kellogg School of Management at Northwestern University.

But, he added, investors have reassessed that view and now seem to think that traditional carmakers like Ford Motor and General Motors will be able to pose a credible competitive challenge to Tesla.

“Some of those companies have been around for 100 years,” said Mr. Benmelech, who uses Tesla as a case study in his classes. “They have good engineers, good management. One should not underestimate the role that competition plays.”

Mr. Benmelech points out that, by most standard measures, Tesla is doing pretty well. The company has reduced its debt and has some of the highest profit margins in the business. It reported a net profit of $8.9 billion in the first nine months of 2022, more than General Motors earned.

This week, there were signs that the share price was stabilizing. The shares rose to $123 on Friday from a two-year low of $109 on Wednesday.

Because many investors compare Tesla to technology companies, it must fulfill loftier expectations than more established automakers. That is why it is still worth roughly $389 billion, compared with about $226 billion for Toyota.

In retrospect, it is clear that Tesla’s stock market valuation of more than $1 trillion at the beginning of the year was overblown, analysts say. Some of the spectacular rise in Tesla’s share price in 2020 and 2021 was probably driven by investors hoping that the company would make them as rich as it had others who bought shares in the company in 2017 when it was worth $40 billion (and considered by some skeptics at the time to be wildly expensive).

“There are times when Tesla looked like it could make someone a millionaire in short order,” said William Goetzmann, a professor of finance at the Yale School of Management who studies asset prices.

That optimism became more difficult to sustain as a series of problems emerged during 2022. Temporary shutdowns at Tesla’s factory in Shanghai because of rising Covid cases, along with intense competition from BYD and other Chinese automakers, cast doubt on Tesla’s chances to dominate electric car sales in that country, the world’s largest auto and electric car market. The Shanghai factory is Tesla’s largest, accounting for 40 percent of its total production.

Tesla is expected to release its fourth-quarter and full-year sales data in the next few days. Wall Street analysts are expecting that the company delivered 420,000 cars in the last three months of the year, up from 343,000 in the third quarter. That would be impressive but not enough for the company to meet its goal of increasing sales 50 percent for the full year.

Rising interest rates were a problem for all automakers, and especially companies, like Tesla, whose vehicles typically sell for more than $50,000. Higher rates mean higher monthly payments that many buyers cannot afford.

Even if rate increases by the Federal Reserve and other central banks were beyond Mr. Musk’s control, analysts faulted him for not paying enough attention to Tesla at a critical moment.

Daniel Ives, an analyst at Wedbush Securities who has long been optimistic about Tesla’s prospects, probably spoke for many investors when he suggested 10 things Mr. Musk could do to revive the company’s share price. High on the list: Name a new chief executive of Twitter and “focus attention back on Tesla, not on Twitter.”

Investors and analysts are divided on how much Mr. Musk’s utterances on Twitter have tarnished Tesla’s image among the left-leaning consumers most likely to buy an electric car. Even putting those concerns aside, Mr. Musk’s behavior has highlighted the lack of checks and balances at Tesla. The company’s board of directors, whose members include the chief executive’s brother, Kimbal Musk, has largely been silent.

Last month, when several directors testified in a Delaware court in a lawsuit challenging Mr. Musk’s giant compensation package, they said they were unconcerned about how much time the executive was spending at Twitter. “He will do whatever he needs to achieve the results,” Robyn Denholm, Tesla’s chairwoman, said on the witness stand.

Tesla, Mr. Musk, Ms. Denholm and Kimbal Musk did not respond to requests for comment.

Len Sherman, an adjunct professor at Columbia Business School who previously worked as a consultant to the auto industry, said Tesla’s board had been exceedingly deferential to Mr. Musk.

“You have no effective governance to rein in his worst impulses,” Mr. Sherman said. “He runs his show the way he wants to run it, and no one can stop him.”

Mr. Sherman, who drives a Tesla and previously owned Tesla stock, is among those who have begun to question whether Mr. Musk is the right person to run the company as it becomes a mature carmaker. He noted that there had been no mention recently of plans to build a $25,000 car that would attract more customers and drive up sales.

“That’s not how you go from where Tesla is now to becoming the next G.M. or Volkswagen,” Mr. Sherman said. “For all his admirable traits, being the only human being on the planet to accomplish what he did, he’s not ideal for the kind of leader Tesla needs going forward.”

With its visionary leader seemingly disengaged, Tesla is being scrutinized according to more conventional standards like revenue and profits and less according to dreams of world domination.

“Now that the cars are ubiquitous,” Mr. Goetzmann of Yale said, “it had to make a transition at some time in its history to not being based on long term prospects but on sales figures and things like that.”