Tesla suspends production in a key market
It’s been a year-end nightmare for Tesla.
It’s the exact opposite of what its charismatic and visionary CEO, Elon Musk, promised in October.
“We’re looking forward to a record-breaking fourth quarter,” Musk told analysts during the company’s third-quarter earnings call. “Looks like we’re going to have a great year-end.”
He added: “Q4 looks incredibly good.”
“I can’t emphasize enough [that] We have great demand for Q4. We hope to sell every car we make in the furthest possible future. So the plants are running at full capacity and we’re delivering every car we make and maintaining high operating margins.”
“Epic” has become an obvious disaster.
Suspended production in Shanghai
A stock market disaster to begin with. Tesla (TSLA) – Get a free report The stock has lost nearly 37% of its value in December alone, representing a roughly $226 billion drop in market capitalization. For the full year, shares of Tesla fell 65%, much to the delight of short sellers who bet on the Model Y and Model 3 maker’s short-term stock market crash.
This collapse has severely affected the shareholders of the corporation, the first of which is Elon Musk, who has completely destroyed his fortune. As a result, this billionaire has lost the title of richest person in the world which now belongs to French businessman Bernard Arnault, CEO of luxury group LVMH. (LVMUY) .
Musk’s net worth fell $132 billion this year to $139 billion on December 26, according to report Bloomberg Billionaire Index.
But as if the year hadn’t been bad, the automaker just closed its Shanghai plant that serves Asia and Europe. Production in Shanghai was halted on December 24, a day before the scheduled date of halting vehicle assembly at the site. Tesla had planned to halt production in Shanghai for a week, from December 25 to January 1, according to Reuters.
But it’s not customary for Tesla to halt production in Shanghai at this time of year. In 2021, Elon Musk’s corporation will not be interrupted in production during the holiday in Shanghai.
The airline has not given an official reason for this temporary closure, but it is clear that it coincides with the time when the Covid-19 pandemic broke out again in China. This new wave of Covid-19 infections appeared after restrictions were eased to limit the spread of the disease.
Workers at Tesla and their suppliers have fallen ill as a result of the wave, posing challenges to operations over the past week, Reuters reported, citing anonymous sources.
Demand can be the problem
But the decision could also be related to weakening demand in China. This car company has continuously lowered the prices of Model 3 and Model Y in this country in recent weeks, launched promotions and drastically reduced delivery times. All these signals suggest that production must be higher than demand.
It is also reported that Tesla will reduce production at the factory in Shanghai. The move will mark the first time Tesla has voluntarily lowered production levels since the factory opened in 2018, even though Covid-19 restrictions and scheduled maintenance cut output earlier in the day. this year.
Tesla did not respond to a request for comment.
The Shanghai factory has a production capacity of more than 750,000 vehicles per year. Of the 936,222 vehicles delivered by Tesla in 2021, more than half (51.7%), or 484,130, come from the Shanghai factory.
The Austin, Texas-based automaker also appears to be experiencing demand problems in the United States, the world’s other major auto market. It recently doubled, to $7,500, a discount for consumers who buy a new Model 3 or a new Model Y before December 31.
Tesla’s offer is more attractive than the federal tax credit that will go into effect in 2023, because the government has set draconian criteria for benefiting from it. The $7,500 tax credit is split in two: $3,750 will apply if at least 40% of the battery’s minerals powering the vehicle come from the United States or a country with a free trade agreement with the United States, under the Inflation Reduction Act (IRA).
Another $3,750 will apply if at least 50% of the battery components come from the US or from countries with a free trade agreement with the US
December is said to be Tesla’s record month for production and deliveries.