Tesla TSLA shares treaded near the lowest levels in five months Tuesday, extending their decline past 20% since the carmaker's third quarter earnings last week, amid a host of indicators that suggest a rough ride ahead for the global EV market.
Tesla shares have lost more than $150 billion in value since the group posted disappointing third quarter earnings, and another contraction in profit margins, while warning that high interest rates and broader economic uncertainty would likely trim demand over the coming months.
U.S. EV rivals Ford F and General Motors GM, meanwhile, fresh from agreeing new labor contracts with the United Autoworkers' Union that ended nearly 45 days of strikes at production and assembly sites around the country, pulled their full-year profit forecasts and pared down electrified car sale prospects as the industry continues to face waning customer interest.
Tesla's key supply chain partner, Panasonic Holdings, warned yesterday that its battery production facilities are running well below capacity amid a glut in global supplies and a pullback in demand.
Panasonic Holdings posted a third quarter loss, and lowered its full-year profit outlook, citing muted sales of Tesla's high-end Model S and Model X cars even amid the multi-level price cuts put in place in order to stoke demand and maintain market share.
$TSLA weakness today could be due to big $ON guidance miss (-18%). ON sells silicon carbide chips to EV makers and cited “increased risk to automotive demand due to high interest rates.” ON sells to automotive players with over 50% share of global EV sales, including 4 of the…
— Gary Black (@garyblack00) October 30, 2023
Another key supply chain operator in the EV space, Phoenix-based Onsemi ON, said yesterday it would cut around 900 jobs as it works through a global inventory glut and muted demand from 'tier one' customers amid "increasing risk to automotive demand due to high interest rates", according to CEO Hassane El-Khoury.
That view was echoed by Tesla CEO Elon Musk last week when he noted that "stormy' economic conditions, rising interest rates and uncertain demand have clouded the group's near-term outlook as he appeared to back away from the company's stated goal of growing overall deliveries by 50% each year.
Musk also suggested the group could delay plans to launch its latest 'gigafactory' in Mexico, citing both the growing global economic uncertainty and the relentless rise in U.S. interest rates.
"I think we want to just get a sense for the global economy is like before we go full tilt on the Mexico factory," Musk told investors last week. "If interest rates remain high or if they go even higher, it's that much harder for people to buy the car. They simply can't afford it."
Related: Tesla slumps as Musk warns on growth, Cybertruck potential after Q3 earnings miss
Tesla is also facing increasing competition in China, its most important market and the world's biggest EV space, as its state-backed rival BYD posted record third quarter profits of $1.4 billion for the three months ending in September last night, and noted its winning a growing share of overseas sales thanks to its partnership with Mercedes Benz.
Tesla shares were marked 2.5% higher in late-day Tuesday trading to change hands at $202.30 each. That would still mark a near 30% drawdown from the stock's year-to-date closing high of $293.34 on July 18.
That's nearly triple the 10.9% decline for the benchmark Nasdaq Composite over the same period of time. The stock hit a five-month low of $194.07 earlier in the session.
The stock is also down around 20% since it published its third quarter earnings on October 18, which showed profits down 37% from last year to 66 cents per share, even as revenues jumped 9.1% to $23.4 billion.
Adjusted automotive margins were 16.1%, Tesla said, well south of the 18.7% figure recorded over the first quarter and last year's second quarter tally of 23.2% following a series of price cuts in its biggest global markets.
Gross margins were 17.9%, down from 25.1% over the same period last year and the 18.2% figure recorded over the second quarter. Wall Street forecasts hovered between 17.8% and 18.2%.
Tesla did, however, reiterate its 2023 delivery target of 1.8 million vehicles – which will require a fourth quarter tally of around 477,000 to achieve – following a muted September quarter.
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