Tesla, Inc. ended 2022 as the worst-performing mega-cap stock, with some of the weakness attributed to concerns about a slowdown in demand, particularly in its key market of China.
More clarity on the demand front will come when the company reports its fourth-quarter shipments early next week, possibly on Monday.
China a wild card: China, considered a key cog in Tesla’s growth story, has proved its sore spot over the past year. A production hiatus due to a COVID-19 outbreak closed the company’s Giga Shanghai plant for about a month from late March. After production resumed, the ramp-up has been slow amid the country’s zero-COVID policy.
Tesla’s Giga Shanghai closed again in July for factory upgrades.
Even as things were getting back to normal, a new wave of COVID hit the country in late 2022. Tesla did not announce a production stop, but domestic upstarts XPeng, Inc. XPEV and Nio, Inc. NIO complained about production losses due to the COVID-19 situation.
But the demand side of the equation has apparently been affected by a series of price cuts Tesla has announced since late October. COVID-19, along with domestic competition, has begun to weigh on Tesla. future fund Gary Blackwho has addressed Tesla’s woes on several occasions recently, said a lack of cheaper cars in China is hurting the company.
Tesla’s sales in China totaled 120,576 units in the third quarter, according to the China Passenger Car Association, accounting for about 35% of the company’s total global sales of 343,830 units. Apart from that, about 67,741 Chinese-made cars were exported for sale in the quarter.
XPeng, Nio and Li Auto, Inc LI’s December and fourth quarter figures released on Sunday showed these domestic electric vehicle startups have rallied despite the tough COVID-19 restrictions. This gives hope for a better than expected figure from China.
In an internal email sent to staff last week, CEO Elon Musk urged her into a big push at the end of the quarter.
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Expectations Temperament: Adam Jonas, an analyst at Morgan Stanley who is bullish on Tesla, said in a recent note that he expects deliveries of 399,000 units in the fourth quarter. The buy-side consensus is between 410,000 and 425,000 units, the analyst said, citing the company’s discussions with investors.
Tesla’s consensus estimate for fourth-quarter deliveries, compiled by Investor Relations, is 417,957 units, data shared by Black shows.
Tesla Forecast Troy Teslike modeled deliveries of 423,000 units and production of 430,308 units for the quarter.
If Tesla hits the company-compiled consensus of around 418,000, the final full-year tally, including the 908,573 units shipped in the first three quarters of the year, would be 1.327 million. That would represent a 41.7% increase from the 936,172 cars delivered in 2021. Tesla has a long-term delivery growth target of 50%. Despite the miss for the year, the fourth quarter number is likely to be a new quarterly record.
Where is the stock headed in the near future? Tesla stock has had a difficult year after falling about 65% in 2022. After the stock bottomed at $108.24 on Wednesday (its lowest price since mid-August 2020), the stock picked up modest upward momentum.
Better-than-expected deliveries in the fourth quarter could reinforce this move. On the contrary, a weak number is likely to lead to a reversal. The next catalyst could be the fourth quarter results, which are expected in late January. The string of price cuts, not just in China but also in the US and Europe, does not bode well for margins.
When the stock opens for trading on Tuesday, January 3rd, $110 could serve as support for any potential downside. Further down, the stock has support around the $94.5 level. In case the recent bullish momentum accelerates, the stock could face resistance around the $129 and $146 levels.
Tesla closed Friday’s session up 1.12% at $123.28, according to Benzinga Pro data.
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