Exactly two months have passed since the financial capital Shanghai was shut down. The number of confirmed cases of corona has fallen from about 30,000 per day to less than 400 in recent days. It remains unclear when the city can reopen.
International financial institutions have cut growth forecasts for China, the world’s second-largest economy, to the bone for 2022 and 2023.
Shares of electric car maker Tesla Inc. fell 6.9 percent on Tuesday and halved since November to $628. Since the beginning of April, the stock price has fallen by 42 percent. The market capitalization is $650 billion.
The problems of tech companies in the US are only part of the reason for the low prices. The shutdown in China has caused big problems for Tesla.
“With production of 13,000 cars per week and above-average profit margins, any production loss in Shanghai would have a significant impact on margins and profits,” Daiwa Securities analyst Jairam Nathan warns in an analysis.
The Japanese brokerage has lowered Tesla’s profit targets for 2022 and 2023 and believes Tesla will have problems with its goal of delivering 1.4 million vehicles from factories in the United States, Germany and China by 2022. Daiwa thinks 1.2 million vehicles is more realistic.
Lives and works in the factory
Chinese authorities have allowed some companies to restart production in Shanghai. Tesla has been operating one shift since April, 12 hours a day, six days a week. Employees work, eat and sleep in the factory area outside the big city.
Tesla has produced about 26,000 cars since production began. This is well below the capacity of about 2,000 cars per day. Now there are plans to start the night shift. Employees must be isolated and tested before they can join other employees in a bubble.
These are miserable conditions. Some employees are sleeping on the factory site. Others will be housed in abandoned factories and in an old army camp. Those who work during the day leave the family on the night shift when they go to work.
Dan Ives at Wedbush Securities, one of the most respected technology analysts in the US who has been a fan of Tesla for many years, has lowered his price target on Tesla.
In April, he advised investors to overweight Tesla and had a price target of $1,400.
It’s a new everyday life for Tesla in China. Ives told the New York Times that the market is reassessing risks.
Passenger car sales have collapsed in Shanghai, China’s richest city, during the lockdown. Tesla also faces new challenges in other markets, which it has dominated for many years. Volkswagen sold 56,000 new electric cars in Europe in the first quarter – just 2,000 fewer than Tesla.
Founder Elon Musk’s attempt to take over the social networking site Twitter is also affecting the Tesla cycle. Bernstein analyst Tony Sakunagi wrote on Tuesday that if the price of Tesla drops below $400, Musk will be forced to sell 13 million shares of Tesla.
– This circus has been a burden on the Tesla track. It gave Musk a blue eye for how he handled this spiraling situation while watching the world. Musk stands at a crossroads. He has to decide the next episode of this series. The patience of Tesla shareholders is very thin, analyst Dan Ives at Wedbush Securities wrote in an analysis.
Ives criticizes Musk’s priorities, including countless outbursts on social media at the same time the price of Tesla is dropping.
It feels like the pilot on the plane is sitting and watching some Netflix at the same time we’re in the middle of a storm, says Ives.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
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