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Elon Musk’s crown jewel, Tesla, has been hit by production challenges in China and slower production in new factories in Texas and Berlin.
Tesla Inc. is expected to complete its record delivery of approximately two years on a quarterly basis as the long-term closure related to COVID in Shanghai affects its production and supply chain, highlighting the risks of its reliance on China.
While Tesla Chief Executive Elon Musk pursued the acquisition of social media platform Twitter Inc, his crown jewel, Tesla, has struggled with production challenges in China and slow production growth in new factories in Texas and Berlin.
Analysts expect Tesla to report the delivery of 295,078 vehicles in the second quarter from Friday, according to Refinitiv data. Several analysts have reduced their ratings to about 250,000 due to China’s long-running closure.
This will be lower than its record presentation of 310,048 records in the last quarter, marking Tesla’s first quarter-on-quarter decline in delivery since the first quarter of 2020.
The world’s most important car manufacturer has released quarterly delivery records since the third quarter of 2020, climate change and supply chain disruptions better than most car manufacturers.
China has been instrumental in Tesla’s rapid increase in car production and Musk praised workers there for “burning oil at 3am.”
But China’s long-term closure of zero-COVID – Wedbush analyst Dan Ives called Tesla’s “albatross” this quarter – caused serious disruption to Musk’s prediction. Tesla’s cheap, lucrative industry in Shanghai produced about half of the company’s vehicles delivered last year, and Ives estimated that the closure of the car was completed by about 70,000 units per quarter.
Musk said in April that production of Tesla cars in the second quarter would be “almost equal” to the first quarter, driven by China’s retaliation. But he recently said Tesla “has a very difficult quarter,” citing the challenges of manufacturing and supply chain in China.
Musk also said Tesla’s new factories in Texas and Berlin were “a huge financial center” losing billions of dollars as they struggled to grow production faster. He said the supply chain problems of car manufacturers are not over and keeping factory factories still a concern.
“An important question is the magnitude of the decline (production in China) and whether the Fremont (California) industry has been able to help with volumes,” said CFRA Research analyst Garrett Nelson.
He expects the volume to double again in the second half of the year, as Tesla increases production at a Shanghai factory by facilitating the closure of COVID-19.
Gene Munster, a partner in the financial services company Loup Ventures, was cautious, saying the third quarter would be difficult for Tesla and other technology companies, citing the risk of a recession.
Tesla has been laying off hundreds of workers in the United States, after Musk earlier this month told management he “felt very bad” about the economy and needed to lay off about 10% of the workforce in the electric car maker.
However, Musk said the demand for Tesla vehicles remains strong.
Tesla shares have fallen by 37% since the beginning of April, hurt by Musk’s Twitter deal and China’s closure. Tesla shares fell 0.3% to $ 683.26 on Thursday.
Musk, a Twitter user this week who passed the 100-million mark, had not posted on Twitter for more than a week.
Cowen analyst Jeffrey Osborne said in the report, “investors are growing tired of Elon’s rhetoric” on Twitter, politics and other topics.
“Many of the people we spoke to asked if we had reached the ‘top of Elon.’
