Nonetheless, yesterday, Tesla reported record production figures. Here’s what you need to know about Tesla so far into the new year and about its latest financial figures:
A Brief Recap of Tesla’s 2022 Trajectory
In 2022, the EV maker was faced with a cocktail of hurdles that stunned its growth. Essentially, inflation and high interest rates drove many investors and traders away from higher-risk stocks like Tesla. This is because, in times of economic turmoil and uncertainty like the ones experienced last year, investors tend to opt for safe-haven assets that are considered more inflation-proof instead. In addition, the renewed COVID restrictions in China which caused supply-chain issues in the Tesla factory in Shanghai also drove Tesla into a downward spiral. In addition to the aforementioned factors, the soaring energy prices caused by the war between Ukraine and Russia, Europe’s biggest energy provider also put a strain on Tesla. This is because, with higher energy prices, demand for EVs may deteriorate.
But perhaps one of the most headline-grabbing factors behind Tesla’s downfall last year was the conclusion of CEO Elon Musk’s controversial purchase of the social media platform Twitter on October 27, 2022. When Musk announced his plans to purchase the social media platform on April 14, 2022, investors and traders seem to have shied away from Tesla as the company slid by 62.4% ever since up till the end of 2022. Not only did Musk purchase Twitter for an astounding $44 billion, but he also had to share about $23 billion worth of Tesla shares to fund his highly contested deal that many market watchers deemed overpriced. In response, many market participants short-sold the EV maker causing it to become 2022’s most profitable short-sell in 2022. Allegedly, Musk also explained to Twitter’s employees that selling Tesla shares was a move to salvage Twitter all while laying off half of the employees.
It is worth mentioning, however, that Tesla has been granting discounts on its cars in China, the country where it owns a major factory all while facing supply chain issues and ensuring efficiency at its new factories in Austin, Texas, and Brandenburg, Germany. Tesla is also supposedly planning to go on a hiring freeze and layoffs spree this year. (Source:CNBC)
Tesla Reports Record Production
Despite 2022’s dreary outlook, on the second day of the new year, Tesla perhaps gave a slight comfort to some of its investors and traders. On Monday, Tesla reported that in 2022, it delivered about 1.3 million vehicles which is 40% more than its 2021 delivery despite the hurdles it faced that year.
Nonetheless, it is worth noting that regardless of the record production and deliveries reported yesterday, the company missed analyst expectations due to delays in logistics, rising interest rates, and fears of a possible recession. While the company reported above 405,000 vehicles in the last three months of 2022, Wall Street analysts have predicted that it would report over 431,000 vehicles for that period perhaps erasing the glimmer of light provided yesterday. It was also revealed that demand for Tesla cars was dwindling in China, which is one of the biggest auto markets in the world driven by competition from other auto-makers like Ford Motors (F) and Lucid Group (LCID).
Despite this, it seems that the economic headwinds did not spare Tesla’s competitors too as Ford and Lucid fell by 46.4%, and 83.3% respectively from the beginning of 2022 up till its end. (Source:Reuters)
Tesla’s 2023 Outlook
With three days into the new year, and as the markets are expected to reopen today after the holiday break, one is left to wonder how the EV giant will fare in 2023. As for now, however, it seems that uncertainty regarding China reopening fully in face of surging COVID infections is still looming large, this could be detrimental to Tesla due to the fact that it holds one of its largest factories in Shanghai, China.
In addition, Tesla revealed its plan to cut production in January in its Shanghai factory, which may buoy a lower output in 2023 as well. As for inflation, while some may think that 2022 may be kinder to consumers, central banks like the Fed Reserve may indicate otherwise. In a press conference, Fed Chair, Jerome Powell, revealed that Fed will likely continue riding the hawkish train in 2023 and that recession may not be out of 2023’s equation. If indeed Powell’s predictions materialize, this may further hinder Tesla’s growth in 2023. So with the economy in the US and China along with the rest of the world still struggling, Tesla may wind up facing more challenges this year.
However, the market is known for its volatility, and as past performance is no indication of future results, there’s always a possibility of a turnaround for the EV giant. Moreover, Tesla reported that it intends to hold an Investor Day on March 1 which will be live-streamed from its Texas Gigafactory, where it will discuss its long-term growth plans. Furthermore, on that anticipated date, the company is likely to reveal a “generation 3” platform and showcase its new vehicle which is supposedly more affordable yet smaller than other models like Model 3 and Model Y cars. If these factors play well into Tesla’s 2023 sales and financial figures, then a possible change in fortunes may be in the cards. In the meantime, however, nothing is certain and traders and investors may want to keep an eye out for Tesla stock when the markets reopen today, January 3rd.