For several years, the meteoric rise of Tesla stock has captivated, thrilled and mystified Wall Street. But in 2022, that meteor blazed out.

The electric-carmaker's stock lost 65% of its value in 2022. And the company kicked off the new year with yet another plunge, dropping 12% in a single day after disappointing sales figures were announced.

That's not only bad for investors. It's also bad for Tesla CEO Elon Musk, who has a big chunk of his wealth tied to the automaker and is no longer the world's richest man.

But what made those sales figures so disappointing? Tesla set new sales records; it grew deliveries 40%. The company continues to dominate the electric vehicle market in the U.S., which is growing rapidly as the world seeks to reduce the carbon emissions causing climate change.

Here are four reasons the transformational company's stock has cratered.

It was a tough year for the entire auto industry

It wasn't just Tesla that saw stock values slide. The stock market as a whole declined in 2022, and within the auto sector, every single automaker saw stock prices go down. Major players like General Motors and Ford fell some 40%, and startups like Rivian and Lucid dropped more than 80%.

All automakers faced the same headwinds that the broader economy faced (inflation, rising interest rates).

They also started off 2022 with shortages of parts that kept dealer lots unusually empty — and ended the year with sky-high vehicle prices that could be turning away would-be buyers.

U.S. auto sales declined in 2022 to decade lows, according to estimates from Cox Automotive.

And Tesla's sales may have increased 40% over 2021, but they still fell short of both its ambitious growth targets and analysts' expectations.

Tesla faces new competition for electric vehicle sales

Despite a tough year for the broader auto industry, electric vehicle sales increased last year. And Tesla continues to dominate the electric vehicle market.

The bad news for Tesla? Competition is rising. At the high end of the market, familiar names such as Mercedes-Benz, BMW and Audi, as well as Lucid, Rivian and Polestar, are starting to cut into the territory of Tesla's pricier models.

"We have a bunch of cars that are competing on even footing with Tesla in that they're performance oriented, they're luxury," says Brian Moody, the executive editor of Autotrader.

Meanwhile, vehicles like the Kia EV6, the Ford Mach-E and the redesigned Chevy Bolt are starting to chip away at the mass market for EVs. There is also growing competition in China, a critical market for Tesla and other automakers.

Tesla still makes up 65% of U.S. electric vehicle sales, according to S&P Global Mobility. But the percentage is dropping, which the stock market doesn't love.

Elon Musk's Twitter takeover is a headache for Tesla

Musk has run multiple companies for years. But his purchase of Twitter last year is not like his stewardship of, say, SpaceX.

The aura around Musk — to his fans, a genius and a visionary — is part of the reason many people want a Tesla. Now Musk has essentially become a professional Twitter troll, posting provocations and gleefully embracing some right-wing positions from his powerful perch atop the social media giant.

A survey by Morning Consult found that between October and November 2022, Tesla's net favorability fell by 20 percentage points among Democrats and rose 4 points among Republicans. That could be affecting sales, since liberal voters tend to be more likely to want to buy electric vehicles.

Musk has also had to sell billions of dollars of Tesla shares to fund his Twitter takeover, which hurt the stock. Musk saw his own personal wealth drop sharply, though he still has more than $100 billion.

Meanwhile, to the dismay of some of his most ardent backers, the amount of time he's spending on Twitter is cutting into the time Musk has for Tesla.

Many Tesla investors are agitating for Musk to name a new CEO of Twitter, as he has claimed he will do, and step back from the social media company.

"This is a moment of truth for Musk to navigate the damage control now," wrote analyst Daniel Ives, a longtime fan of Tesla who has criticized Musk's handling of the Twitter purchase, "or the brutal pain will continue."

It turns out that Tesla is an auto company

Another possible explanation for why Tesla stock fell so much: It was simply priced too high to begin with and it's now trading at more realistic levels.

For a window of time, Tesla traded like a high-flying tech stock, rather than a manufacturer of goods.

Musk himself encouraged that, calling Tesla a "software company." The word "stratospheric" was thrown around a lot as the stock price soared so high that it could not possibly be justified based on Tesla's revenues or production figures.

Now prices have tumbled back closer to earth, for Tesla as well as the tech companies it resembled on Wall Street.

So as a stock, Tesla had a terrible year. But as a company that does, in fact, make cars — physical things people buy and drive around — Tesla managed to sell 1.3 million of them in 2022.

That's impressive, especially given the supply chain struggles that have plagued the entire industry.

Looking ahead, even with more competition, there's plenty of room for Tesla to keep growing.

"Their volumes are still going to come up, and they're still going to make money," predicts Stephanie Brinley of S&P Global Mobility.

And worth noting: Even after losing a mind-bending $700 billion in value, Tesla is still the world's highest-valued automaker.