Losses Top $895 Billion As Rival Carmaker Warns Of ‘Challenging’ Weeks Ahead

Topline

Shares of Tesla plunged to a fresh two-year low on Tuesday as the embattled automaker—already reeling from concerns chief Elon Musk has shifted too much focus to Twitter—reportedly faces a prolonged shutdown at a key factory next month and broader skepticism the electric vehicle industry can meet lofty sales expectation as Covid-19 outbreaks pummel demand in China, the world’s largest auto market.

“Musk has lost credibility with the broader investment community,” one long-time Tesla bull warns of … [+] the stock’s massive losses this year.

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Key Facts

Tesla shares tanked 11.5% Tuesday to $109—the lowest level since August 2020 and a stunning 73% decline since a high of more than $400 in November 2021.

Losses piled on in pre-market trading immediately after Reuters reported the firm plans to cut production at its Shanghai factory in January, according to an internal plan that purportedly reveals the automaker will operate between January 3 and January 19 and then halt production for the rest of the month to observe the Chinese New Year.

Tesla, which disbanded its communications team in 2020, did not comment on the reports, though they come as the firm this weekend extended a planned eight-day production halt at the plant, which is the company’s largest by car volume, in response to a growing wave of Covid-19 infections and workers and suppliers.

In emailed comments, analyst Adam Crisafulli of Vital Knowledge Media called the news only the “latest in a series of cautious headlines” about Tesla, noting the company last week rolled out a $7,500 discount—double what it was offering earlier this month—for its two most popular models in a bid to help bolster end-of-year demand.

Further fueling pessimism, rival electric-vehicle-maker NIO on Tuesday morning warned it has been “facing challenges in deliveries and production” as a result of Covid-19 outbreaks across major cities in China this month and slashed its projected fourth-quarter deliveries by some 15%, sending its shares down 8%.

What To Watch For

Tesla’s fourth-quarter delivery numbers are due out in early January. Analysts predict another record quarter for the firm, with about 422,000 vehicles delivered. Any less than that could further rattle investors.

Key Background

Shares of Tesla skyrocketed to an all-time high last November but have racked up big losses after Musk soon started selling shares and this year turned some attention to social media giant Twitter. Tesla stock’s collapse has made it the fifth-worst performing stock in the S&P 500 this year; the index is down 20%. Most of the decline has happened since late September, when Twitter shareholders approved Musk’s $44 billion bid to buy the ailing social media network. “Musk has lost credibility with the broader investment community,” Wedbush analyst Dan Ives said in a note to clients last week, blaming Tesla’s stock woes on Musk’s “broken promises,” as he sells stock “again and again” despite having previously said he’s “done” doing so.

Crucial Quote

“At the same time that Tesla is cutting prices, and inventory is starting to build globally… Musk is viewed as asleep at the wheel from a leadership perspective,” says Ives, giving the stock a one-year price target of $125.35—less than 9% of the analyst’s bullish price target of $1,400 in January.

Surprising Fact

Tesla’s market value peaked at more than $1.2 trillion in November 2021. The stock is now worth $344.5 billion—representing some $895 billion in losses.

Tangent

Though Musk was at one point worth more than $215 billion, Tesla’s plunging shares have pushed his fortune down to less than $140 billion, according to Forbes‘ estimates. The 51-year-old ceded his title as the world’s richest person earlier this month, when he was surpassed by luxury goods titan Bernard Arnault.