NEW YORK: Tesla Inc shares fell 11.4% on Tuesday (Dec 27) following a Reuters report that Tesla was planning to run a reduced production schedule in January at its Shanghai plant sparked worries of a drop in demand in the world’s biggest car market.
The stock, which fell to its lowest in more than two years and had its worst day in eight months, was the biggest drag on the benchmark S&P 500 index and the tech-heavy Nasdaq index.
It has lost more than half its value since the start of October as investors worry that Twitter was taking much of chief executive Elon Musk’s time while fretting about his stake sale in the electric-car maker.
The world’s most valuable automaker’s production cuts at the Shanghai plant come amid a rising number of Covid-19 infections in the country.
“There’s no question there are demand fears,” Great Hill Capital chairman Thomas Hayes said, citing a delivery forecast cut from Chinese rival Nio Inc in the key market.
Hayes added that Tesla’s stock was facing a “perfect storm” of high-interest rates, tax -loss selling and share sales by some funds that hold a significant amount of Tesla stock.
Tax-loss selling is when an investor sells an asset at a capital loss to lower or eliminate the capital gain realised by other investments, for income tax purposes.
Tesla plans to run a reduced production schedule at its Shanghai plant in January, extending the reduced output it began this month into next year, according to an internal schedule reviewed by Reuters.
Tesla will run production for 17 days in January between Jan 3 and Jan 19 and will stop electric vehicle output from Jan 20 to Jan 31 for an extended break for Chinese New Year, according to the plan seen by Reuters.
Tesla did not specify a reason for the production slowdown in its output plan. It was also not clear whether work would continue outside the assembly lines for the Model 3 and Model Y at the plant during the scheduled downtime. It has not been established practice for Tesla to shut down operations for an extended period for Chinese New Year.
Tesla did not immediately respond to a request for comment from Reuters.
Tesla suspended production at its Shanghai plant on Saturday, pulling forward an established plan to pause most work at the plant in the last week of December, Reuters has reported.
Brokerage China Merchants Bank International said in a report issued on Tuesday that Tesla average daily retail sales in China from Dec 1 through Dec 25 were down 28% from a year earlier. It said Tesla recorded 36,533 retail sales in China from Dec 1 through Dec 25.
The brokerage, which tracks week-by-week retail auto sales data in China as a snapshot of demand, said industry-wide sales were up almost 15% by the same metric through Dec 25. It said average daily sales for BYD, Tesla's larger electric vehicle rival in China, were up 93% in that period.
Tesla's Shanghai factory, the most important manufacturing hub for Musk’s electric vehicle company, kept normal operations during the last week of December last year and took a three-day break for Chinese New Year.
The Jan 21 to Jan 27 period in 2023 is a public holiday in China for Chinese New Year.
Tesla’s Shanghai plant, a complex that employs some 20,000 workers. accounted for more than half of Tesla's output in the first three quarters of 2022.
Tesla has set a target for growth of 50% in output and electric vehicle deliveries in 2022. Analysts expect output to fall short of that goal at closer to about 45%, based on forecasts for the soon-to-end fourth quarter.
Meanwhile, a Reuters analysis showed that prices of used Tesla cars were falling faster than those of other carmakers, weighing on demand for the company's new vehicles rolling off the assembly line. – Reuters
