Tesla plays ‘whack-a-mole’ with hooks as deliveries fall for first time in two years

Tesla plays 'whack-a-mole' with hooks as deliveries fall for first time in two years
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July 5 (Reuters) – Tesla Inc (TSLA.O) is facing a slew of hurdles ranging from output shortages to rising inflation that could hurt profits, Wall Street analysts said on Tuesday, as the electric-car maker reported a drop in deliveries for the first time in two years.

Hit by China’s COVID-19 lockdowns and rising costs, Tesla said on Saturday it delivered 254,695 vehicles in the second quarter, down about 18% from the first quarter. Continue reading

Supply chain issues at the company’s newer plants in Texas and Germany also impacted production, with analysts warning these issues could eat away at Tesla’s profits.

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Shares of the world’s largest electric carmaker fell more than 3% but reversed course to close 2.6%, benefiting from a rally in growth stocks.

The stock has lost about a third of its value so far this year.

“Tesla’s shine has faded yet again as this latest drop in deliveries fell short of expectations,” said Hargreaves Lansdown analyst Susannah Streeter, adding that it was a setback to the automaker’s ambitions to remain at the forefront of electric vehicles.

“Tesla faces a whack-a-mole scenario, the quicker one issue is fixed, the more another pops up.”

JP Morgan analysts, who cut the company’s share price by $10 to $385, said Tesla’s manufacturing and financial results could be impacted by company-specific execution issues at the automaker’s new factories in Texas and Berlin.

Tesla boss Elon Musk recently described both factories as “gigantic money furnaces” that are losing billions of dollars. Continue reading

Streeter warned that the global decline in the cost of living due to blistering inflation could have a knock-on effect on demand.

However, some analysts expect a recovery towards the end of the year.

The Austin and Berlin plants are likely to weigh on results until they reach higher utilization rates, but expect volumes to recover strongly in the second half of the year, said Garrett Nelson, senior equity analyst at CFRA Research.

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Reporting by Eva Mathews in Bengaluru; Additional reporting by Chavi Mehta in Bengaluru; Edited by Ankur Banerjee and Shounak Dasgupta

Our standards: The Thomson Reuters Trust Policy.

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