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Tesla: Chinese Risk

Tesla: Chinese Risk

7 December 2022

Recently, Tesla seemed to be found between the hammer and an anvil: ambitious management plans and the real state of affairs. Due to the safety margin, nothing critical is happening right now, but a number of signals attract attention. For example, news about a Chinese factory.

Tesla now has three full-fledged points of production of electric vehicles: in the USA (California), China (Shanghai) and Germany. The main plant in California is located on 150 hectares. Tesla bought it in 2010 after the NUMMI joint venture ceased to exist. The factory in Shanghai opened in 2019, the newest production is in Germany. Tesla is building factories all over the world, but it will take time.

The latest news concerns the Shanghai plant. In December, Tesla plans to reduce production of the Model Y by 20% on a monthly basis. The company is closely monitoring demand and understands that Chinese interest does not reach the target. Production volumes will recover if they see an increase in demand. 

However, the signal is very alarming: this is the first time when an ambitious company voluntarily reduces production. 

It is too early to say that the bet on China has not justified itself. After all, all the work at this factory and market was related to stress – the pandemic, and then the global recession. But in the general outline of Tesla’s business, this is far from the best news.

That’s what’s going on with the Tesla papers right now. The stock is falling to $179, the medium-term trend is downward. In comparison with the broad market, the securities look rather weak, it is possible to continue the decline to $ 165-168. 

Recall that Tesla’s data for the third quarter were quite confident, but even then there were risks in the supply chains. There were still questions about the volume of sales of cars. 

The long-term target for the company’s shares in the future of the year at the level of $300 is left unchanged for now.

7 December 2022
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