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New year, same selloff: Tesla shares slump on demand worries, logistical issues

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Members of media and guests surround the Tesla Model Y and Model 3 during Thailand Tesla’s official launch event in Bangkok, Thailand, December 7, 2022. REUTERS/Athit Perawongmetha

Tesla Inc (TSLA.O) shares started 2023 where they left off last year, dropping by as much as 10.5% on Tuesday on growing worries about weakening demand and logistical problems that have hampered deliveries for the world’s most valuable automaker.

Once worth more than $1 trillion, Tesla lost more than 65% in market value in a tumultuous 2022. Tuesday’s slide came after the electric vehicle maker missed estimates for fourth-quarter deliveries despite shipping a record number of vehicles.

Several Wall Street analysts said they expected more pressure on the stock in coming months as it faces stiffer competition from other automakers and weaker global demand.

At least four brokerages cut their price targets and earnings estimates on Tuesday, pointing to the deliveries’ miss and Tesla’s decision to offer more incentives to boost demand in China and the United States, the two largest global auto markets.

“Demand overall is starting to crack a bit for Tesla and the company will need to adjust and cut prices more especially in China, which remains the key to the growth story,” Wedbush Securities analyst Dan Ives said.

Global automakers have in the past few months battled a demand downturn in China, the world’s number one auto market, where the spread of COVID-19 has hit economic growth and consumer spending.

Tesla is offering hefty discounts there, as well as a subsidy for insurance costs.

Worth about $390 billion now, Tesla is still the world’s most valuable automaker, even though its production is a fraction of rivals such as Toyota Motor Corp (7203.T).

Tesla’s performance in 2022 was among the worst in the broad-market Standard & Poor’s 500 index (.SPX). Its shares last traded at $111.58.

The electric vehicle maker delivered 405,278 vehicles in the fourth quarter, short of analysts’ estimates of 431,117, according to Refinitiv. For all of 2022, its deliveries rose by 40%, missing CEO Elon Musk’s 50% annual target.

The result “came at the cost of higher incentives, suggesting lower pricing and margin,” brokerage J.P. Morgan said in a note, lowering its price target by $25 to $125.

The shortfall highlighted the logistics hurdles facing a company, which is known for its end-of-quarter delivery rush. The gap between production and deliveries has widened to 34,000 vehicles as more cars got stuck in transit.

The automaker also plans to run a reduced production schedule in January at its Shanghai plant, extending the lowered output it began in December into 2023, Reuters reported.

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