Tesla Inc. is said to be It has cut prices on two models in China, where it faces stiff competition from rivals such as BYD Co. Ltd. It is grappling with an ongoing difficult economic backdrop.
Tesla shares fell more than 3% in morning trading on Friday. Investors were also grappling with news of the temporary closure of production facilities in Germany.
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It cut starting prices for its Model 3 sedan by 5.9% and its Model Y SUV by 2.8%, according to reports Friday from Reuters, Bloomberg News and social media accounts that track the automaker.
“China Model 3/Model Y sales account for 8%/24% of total volume,” Piper Sandler analyst Alexander Potter wrote, though he also noted that Tesla tends to pass on lower input prices to consumers and has seen spot lithium prices sharp decline. newly.
China's economy is struggling to fully get back on its feet after the global pandemic, with consumers slowing spending even amid government stimulus efforts. Official data released on Friday showed consumer prices falling 0.3% in December for the third straight month of declines.
Tesla shares are down more than 11% so far this year, and the stock has only seen one positive session since December 28. These losses come as the automaker announced better-than-expected deliveries in the fourth quarter at the beginning of the month, but faltered. From its base as the world's leading electric vehicle retailer by BYD 002594 backed by Berkshire Hathaway,
China's electric vehicle market is largely dominated by local companies, with Tesla taking on not only BYD but also Li Auto Inc. In 2015,
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Geopolitical tensions hit electric car maker
Separately, Tesla also appears to have been drawn into the conflict in the Middle East, with media reports saying the electric car maker will halt the majority of vehicle production near Berlin for two weeks due to a “shortage of components.”
“Armed conflicts in the Red Sea and associated shifts in transportation routes between Europe and Asia via the Cape of Good Hope are also having an impact on production at Gruenheide,” Tesla said in a statement on Thursday, according to Reuters and other media. outlets.
“As long as the pause is not extended, we believe Tesla will lose [about 10,000 units of production,” Potter wrote, adding that the German plant is Tesla’s lowest by volume and the company “presumably” could make up for lost production once the plant opens up again.
“As usual, we think most of this ‘noise’ has little bearing on the long-term thesis,” Potter wrote. “But nonetheless, it’s important for investors to understand how sentiment is evolving, because [Tesla] “(It will likely remain) more volatile than many of the other stocks in our coverage.”
The Red Sea is an important shipping method for goods traveling through the Suez Canal, with $1 trillion worth of goods expected to pass through it every year.
Many shipping companies were forced to change their routes due to the ongoing attacks by the Houthi rebels in Yemen, which began after the start of the war between Israel and Hamas in October. The alternative route is longer and often incurs more costs for the companies involved, while global shipping rates have increased due to these attacks.
Analysts at Bird expect the Berlin plant to produce between 5,000 and 7,000 vehicles per week, “due to the plant not always reaching full utilization and other factors.” The closure will result in first-quarter deliveries falling by between 10,000 and 14,000 units, analysts Ben Callow and David Sunderland said in a note.
“Although the length of the conflict in the region is uncertain, we are concerned about its further impacts [Tesla’s] Supply chain and/or shipping methods for international deliveries, they added. Specifically, they note that Tesla's Shanghai factory is making deliveries to several regions, including Australia and Europe.
“No delays have been indicated, but we expect disruptions in the Red Sea to lead to longer wait times as supply chains are redirected,” they said.
MarketWatch has reached out to Tesla for comment.
is reading: The United States and Britain launched a large-scale retaliatory strike against the Iran-backed Houthis in Yemen
